Source: https://supreme.justia.com/cases/federal/us/339/497/
Timestamp: 2019-04-23 04:20:21+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 339 › Powell v. United States Cartridge Co.
The Fair Labor Standards Act applies to employees of a private contractor operating a Government-owned munitions plant under a cost plus a fixed fee contract with the Government. Pp. 339 U. S. 498-522.
1. Such employees are not employees of the United States within the meaning of the Act. Pp. 339 U. S. 504-508.
2. Such employees are engaged in the production of goods for commerce within the meaning of the Act. Pp. 339 U. S. 509-515.
(a) The "transportation" of munitions of the United States to destinations outside of the state of their production is "commerce" within the meaning of the Act, even though the munitions were transported for use or consumption, and not for sale or exchange. Pp. 339 U. S. 511-512.
(b) The munitions produced were "goods" within the meaning of the Act, even though they were produced for delivery into the actual physical possession of the United States as their ultimate consumer. Pp. 339 U. S. 512-515.
3. The Fair Labor Standards Act and the Walsh-Healey Act of June 30, 1936, 41 U.S.C. §§ 35 et seq., are not mutually exclusive, but are mutually supplementary. Pp. 339 U. S. 515-520.
4. Neither the Act of July 2, 1940, 50 U.S.C.App. §§ 1171, 1172, nor the action of the Secretary of War taken pursuant thereto excludes the applicability of the Fair Labor Standards Act to such employees. Pp. 339 U. S. 520-522.
174 F.2d 718; 174 F.2d 730; 171 F.2d 964, reversed.
The facts and proceedings below are stated in the opinion at pp. 339 U. S. 499-504. The judgments below are reversed, and the causes remanded, p. 339 U. S. 522.
States. We hold that the Act does apply, but we do not reach the question of the validity of the individual claims based upon it.
This issue was argued here in Kennedy v. Silas Mason Co., 334 U. S. 249. We, however, remanded that case and withheld decision of the issue, awaiting a more solid basis of findings. 334 U.S. at 334 U. S. 257. Each of the instant cases presents such a basis.
respondent for its expenditures in such operation and, in addition, pay the respondent a fixed fee based upon the types and quantities of ammunition it supplied. The title to the site, plant, equipment and, in general, to the raw material, work in progress, and finished munitions was to be in the Government. [Footnote 4] Most of the materials were to be supplied by the Government. The contract provided expressly for the reimbursement of the respondent's expenses for labor. The respondent, in turn, agreed to supply practically all services incident to the setting up of an efficient operating force and to the operation of the plant until the required ammunition had been produced. The respondent was made responsible for storing the materials, supplies, and finished ammunition, and for loading the ammunition on cars or other carriers in accordance with the Government's instructions. The ammunition generally was shipped by common carrier on Government bills of lading to military destinations outside of Missouri. The Government reserved large rights of supervision, auditing, and inspection, to be exercised through its "Contracting Officer." The employees, including the petitioners, were to be hired, assigned, directed, supervised, paid, and discharged by the respondent.
"There will be eight hours in any working day, and forty hours will constitute a working week. . . . When production demands require a longer work day, or longer work week, the Company will pay the legal overtime rate as provided under the Walsh-Healey Act and the Fair Labor Standards Act."
fee and costs. The respondent moved for a new trial so that the Portal-to-Portal Act of 1947, [Footnote 6] which had been adopted five days before the District Court's judgment, might be applied to the issues. The motion was denied, and the case was appealed. While the appeal was pending in the United States Court of Appeals for the Eighth Circuit, the decision of this Court in Kennedy v. Silas Mason Co., supra, was announced. The Court of Appeals thereupon heard a reargument of this case with special reference to the issues raised in the Silas Mason case. Sitting en banc, it reversed the District Court and held that the Fair Labor Standards Act did not apply to employment at the St. Louis Ordnance Plant. 174 F.2d 718. All seven judges held that the Walsh-Healey Act applied to such employment to the exclusion of the Fair Labor Standards Act. Four of those judges also joined in an opinion (p. 726) stating that the Act of July 2, 1940, had given discretion to the Secretary of War to determine what overtime regulations should be applicable to Government-owned privately operated plants, and that, through his adoption of the Walsh-Healey Act, he had rendered the Fair Labor Standards Act inapplicable under this contract. The Court of Appeals did not reach the merits of the individual claims of the petitioners under the Fair Labor Standards Act. We granted certiorari. 338 U.S. 810.
of fact, and answers to interrogatories. The plant was operated by the respondent under a cost plus a fixed fee contract entered into with the United States in July, 1941, and generally comparable, for present purposes, with that, in the Powell case. The petitioners, 1,278 in number, were handlers, carriers, and processors of explosives, who claimed additional compensation under the Fair Labor Standards Act for approximately 35 minutes before, and 30 minutes after, their scheduled work in the plant. The respondent answered and moved for summary judgment on three grounds -- that the petitioners were not engaged in the kind of work that is covered by the Fair Labor Standards Act, that they are not within the coverage of the Act because they were employees of the United States, and that, by virtue of the Portal-to-Portal Act of 1947, they are not entitled to recover in any event.
In rendering judgment for the respondent, the District Court adopted its opinion in Barksdale v. Ford, Bacon & Davis, 70 F.Supp. 690. Without passing on other contentions, it there held that the Fair Labor Standards Act was not applicable because, in processing and assembling munitions under like conditions, the respondent had not been engaged "in the production of goods for commerce" within the meaning of that Act. The Court of Appeals for the Eighth Circuit affirmed, 174 F.2d 730, on authority of its decision in the Powell case, supra. We granted certiorari. 337 U.S. 955.
near Texarkana, Texas, was owned by the Government and operated by the respondent under a cost plus a fixed fee contract entered into with the United States in July, 1941, comparable in its material features to those in the Powell and Aaron cases. The petitioners, several hundred in number, were employed at the plant in capacities such as those of truck drivers, lift-fork operators, loaders, and unloaders. Their services were used in the production of munitions, such as shells, bombs, detonators, and other ordnance items. The title to substantially all of the raw material, work in progress, and finished products was in the Government. Most of the materials were furnished by the Government, and the finished products were shipped in accordance with Government instructions on Government bills of lading to military destinations, usually outside of Texas. The petitioners sued for overtime pay claimed to be due them under the Fair Labor Standards Act. Quoting from the opinion of the District Court in the Barksdale case, supra, the trial court gave judgment for the respondent. The Court of Appeals for the Fifth Circuit affirmed. 171 F.2d 964. It stated that the respondent, on the record before it, was an agency of the Government, was not an independent contractor, and was not engaged in commerce within the meaning of the Fair Labor Standards Act. We granted certiorari. 337 U.S. 923. We heard this case with the Powell and Aaron cases.
coverage. [Footnote 7] A similar defense is presented through the claim that the respondents were not independent contractors, but were agencies of the United States, representing and binding the United States as their principal in the employment of petitioners.
"Article I-E-Authority of the Contractor."
"In carrying out the work under this Title I, the Contractor is authorized to do all things necessary or convenient in and about the operating and closing down of the Plant, or any part thereof, including (but not limited to) the employment of all persons engaged in the work hereunder (who shall be subject to the control and constitute employees of the Contractor). . . ."
Each contract is replete with references to the persons employed as the "employees of the Contractor" or "persons employed by the Contractor."
"Article III-A -- Status of Contractor."
"It is expressly understood and agreed by the Contractor and the Government that, in the performance of the work provided for in this contract, the Contractor is an independent contractor, and in no wise an agent of the Government."
Such provisions are persuasive that the petitioners should be recognized here as employees of the respective respondents, and the respondents as independent contractors. The respondents argue, however, that the context of the times, other provisions of the contracts, and the practice under the contracts deprive these statements of their ordinary meaning. We find, on the contrary, that each of these sources supplies additional evidence that these provisions correctly state the true relationship between the petitioners and respondents.
"Whereas, The Government desires to have the Contractor, as an independent contractor on a cost plus a fixed fee basis, make all necessary preparations for the operation of said plant, including the training of operating personnel . . . but excluding the procurement and supervision of the installation of manufacturing facilities (to be done, under a like contract, by the contractor's parent corporation, Western Cartridge Company), and operate said plant. . . ."
operation as well as under governmental ownership. To do so, however, might have weakened our system of free enterprise. We relied upon that system as the foundation of the general industrial supremacy upon which ultimate victory might depend. In this light, the Government deliberately sought to insure private operation of its new munitions plants.
In these great projects built for and owned by the Government, it was almost inevitable that the new equipment and materials would be supplied largely by the Government, and that the products would be owned and used by the Government. It was essential that the Government supervise closely the expenditures made and the specifications and standards established by it. These incidents of the program did not, however, prevent the placing of managerial responsibility upon independent contractors.
primary purpose of Congress was not to regulate interstate commerce as such. It was to eliminate, as rapidly as practicable, substandard labor conditions throughout the nation. It sought to raise living standards without substantially curtailing employment or earning power.
Roland Electrical Co. v. Walling, 326 U. S. 657, 326 U. S. 669-670. The Government's munitions plants provided an appropriate place for the beneficial application of the Act's standards of working conditions without danger of reduced employment through loss of business. This Act would fail materially in its purpose if it did not reach the producers of the tremendous volume of wartime goods destined for interstate transportation. In 1941-1945, the manufacture of munitions was a major source of employment. Wages and hours in that industry were a major factor in fixing the living standards of American labor.
A. The "transportation" of munitions of the United States to destinations outside of the state of their production is "commerce" within the meaning of the Act. The Act applies to "employees . . . engaged in commerce or in the production of goods for commerce." [Footnote 13] The precise question here is whether the munitions were produced for "commerce" when such production was for transportation outside of the state and for use by the United States in the prosecution of war, but not for sale or exchange.
(Emphasis supplied.) 52 Stat. 1060, 29 U.S.C. § 203(b).
"(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 ingredient thereof, but does not include goods after their delivery into the actual physical possession of the ultimate consumer thereof other than a producer, manufacturer, or processor thereof."
(Emphasis supplied.) 52 Stat. 1061, 29 U.S.C. § 203(i).
Respondents claim that this language excludes the petitioners from the coverage of the Act because the petitioners were engaged in producing munitions which thereafter, and prior to their interstate transportation, were to be delivered to the United States as the ultimate consumer. This interpretation would deprive the original jurisdictional fact -- that, at the time the munitions were produced, they were intended for interstate transportation -- of its covering effect merely because those munitions, upon a later delivery to the United States, would then cease to be "goods" within the meaning of the Act.
of the United States as their ultimate consumer, before their subsequent interstate shipment, does not deprive the employees who produced the munitions of the benefits of the Fair Labor Standards Act. It is not material whether such interstate transportation was to take place before or after the delivery of the munitions to the United States. In either event, the employees were engaged in the production of "goods" for "commerce." To hold otherwise would restrict the Act not only arbitrarily, but also inconsistently with its broad purposes.
that no male person under 16 years of age, no female person under 18 years of age, and no convict labor be employed by the contractor, and that no part of the contract be performed or any of the material, supplies, articles, or equipment be manufactured or fabricated under working conditions unsanitary, hazardous, or dangerous to the health and safety of the employees.
". . . to protect the fundamental interests of free labor and a free people, we propose that only goods which have been produced under conditions which meet the minimum standards of free labor shall be admitted to interstate commerce. Goods produced under conditions which do not meet rudimentary standards of decency should be regarded as contraband, and ought not to be allowed to pollute the channels of interstate trade."
working on public projects as well as on private projects. Where exceptions were made, they were narrow and specific. It included as employees "any individual employed by an employer," § 3(e), and defined an employer so as amply to cover an individual or corporation employing persons on public contracts, while expressly excluding, as an employer, "the United States or any State or political subdivision of a State. . . ." § 3(a) and (d). It devoted § 13 to listing exemptions of specific classes of employees. For example, it exempted any seaman, any employee of a carrier by air subject to Title II of the Railway Labor Act, and any employee employed in agriculture. It exempted certain employees under § 204 of the Motor Carrier Act, 1935, [Footnote 20] but limited their exemption to the maximum hour provisions in § 7. It also exempted any employee of an employer subject to Part I of the Interstate Commerce Act. Such specificity in stating exemptions strengthens the implication that employees not thus exempted, such as employees of private contractors under public contracts, remain within the Act.
with any Federal or State law or municipal ordinance establishing a higher standard than the standard established under this Act. No provision of this Act shall justify any employer in reducing a wage paid by him which is in excess of the applicable minimum wage under this Act, or justify any employer in increasing hours of employment maintained by him which are shorter than the maximum hours applicable under this Act."
52 Stat. 1069, 29 U.S.C. § 218.
Despite evidence that the two statutes define overlapping areas, respondents contend that they should be construed as being mutually exclusive. There has been no presentation of instances, however, where compliance with one Act makes it impossible to comply with the other. There has been no demonstration of the impossibility of determining in each instance the respective wage requirements under each Act, and then applying the higher requirement as satisfying both.
The Government has presented, as a considered analysis of the overlapping effects of these Acts, excerpts from the Manual of Instructions for the Administration of Contracts (War Department, Office of the Chief of Ordnance, 1941). These are published in the appendix to the brief of the United States. Their forthright treatment and detailed suggested solutions of the practical aspects of the supplementary use of the two Acts are impressive.
In some, and probably most, instances, the "prevailing minimum wages" required by the Walsh-Healey Act were more advantageous to employees than the minimum wages prescribed by the Fair Labor Standards Act at the times here under review. [Footnote 23] On the other hand, the remedial procedure under the later Act was generally more advantageous to employees than the procedure under the earlier Act.
before us therefore does not preclude the application of the Fair Labor Standards Act to employees under the same contracts. We find the Acts to be mutually supplementary.
We find in the Act of July 2, 1940, [Footnote 24] no such recognition of the uniqueness of War Department contracts for the private operation of Government-owned munitions plants as is claimed in the concurring opinion below in the Powell case. [Footnote 25] Without more specific provisions than this Act contains, we cannot interpret it as excluding, or as granting, authority to executive officers to exclude, employees in such plants from the benefits of the general wage and hour provisions which Congress has established in the Walsh-Healey Act and more fully and recently in the Fair Labor Standards Act.
approval of estimates and the making of appropriations prior to undertaking construction of certain buildings, § 1(a), restrictions on leasing, § 1(b), restrictions on the assignment of personnel, § 2(b), limitations on the number of serviceable aircraft, § 3, and restrictions as to civil service employees (§ 4(a)). No suggestion was made of a suspension of part or all of the Fair Labor Standards Act, nor was anything authorized that would violate that Act.
"A question has arisen -- and the amendment is simply to remove the ambiguity -- as to whether the Walsh-Healey Act, which is now definitely applicable to a contract for the purchase of supplies as a result of advertising, will also apply to a negotiated contract. . . ."
". . . Unless this amendment is adopted, we would have this anomalous situation: under a contract entered into with the Government as the result of public bidding, one set of minimum wages, that is, the prevailing wages [under the Walsh-Healey Act] would be applied, whereas, under another contract entered into as a result of negotiations, a much lower minimum wage would be paid, that is, the flat minimum under the Wage and Hour Act [the Fair Labor Standards Act]. This situation would present an opportunity for exploitation, since a contractor under a negotiated contract might be paying wages in some instances 25 percent to 75 percent below those required under the Healey-Walsh Act. I am sure that we would not want to invite any such exploitation."
(Emphasis supplied.) 86 Cong.Rec. 7924 (1940).
See also 86 Cong.Rec. 7839-7843, and H.R.Rep. No.2685, 76th Cong., 3d Sess. 1 (1940).
We have considered the other contentions of the respondents, including the weight to be given to the Statement of Labor Policy issued by the War and Navy Departments in 1942, [Footnote 26] but we do not find in them a convincing refutation of the foregoing conclusions. We accordingly find that the Fair Labor Standards Act of 1938, as amended, is applicable to the issues presented in each of the instant cases. We do not reach the validity of the individual claims of the petitioners made in reliance upon that Act.
In No. 96, Powell et al. v. The United States Cartridge Company, the judgment of the Court of Appeals is reversed, and the cause is remanded to that court for further consideration of the errors asserted on appeal but not reviewed by that court.
In No. 79, Aaron et al. v. Ford, Bacon and Davis, and in No. 58, Creel v. Lone Star Defense Corporation, the judgments of the respective Courts of Appeals are reversed, and the causes are remanded to the respective District Courts for further proceedings in conformity with this opinion.
* Together with No. 79, Aaron et al. v. Ford, Bacon & Davis, Inc., on certiorari to the United States Court of Appeals for the Eighth Circuit, and No. 58, Creel et al. v. Lone Star Defense Corp., on certiorari to the United States Court of Appeals for the Fifth Circuit.
52 Stat. 1060 et seq., 53 Stat. 1266, 54 Stat. 615-616, 55 Stat. 756, 61 Stat. 87, 63 Stat. 446, 910-920, 29 U.S.C. §§ 201-219, 29 U.S.C. (Supp. III) §§ 201-217.
Congress charged the War and Navy Departments with the operation of about 100 giant Government-owned munitions plants. Those Departments had the option of operating them themselves or through commercial contractors. So as to utilize fully the labor and management resources of the nation and to minimize encroachment upon its industrial structure, both Departments chose the latter course. As to the general war production policies, see Lichter v. United States, 334 U. S. 742, 334 U. S. 767-768. Out of 143 billion dollars of contracts made by the War Department between 1941 and 1946, over 40 billions were cost-plus contracts. Out of 68 billion dollars of Navy contracts, 18 billions were cost-plus contracts. Hearings before Subcommittee of the Senate Committee on the Judiciary on S. No. 70, 80th Cong., 1st Sess. 422-423, 624-626 (1947). The quotation in the text is from the contract in this case, see p. 339 U. S. 505 infra.
54 Stat. 712-714, 50 U.S.C. App. §§ 1171, 1172.
"The title to all work under this contract, completed or in the course of construction or manufacture, and to all the Ammunition manufactured or in the process of being manufactured, shall be in the Government. Likewise, upon delivery at the site of the work, or at an approved storage site, title to all purchased materials, tools, machinery, equipment, and supplies, for which the Contractor shall be entitled to be reimbursed under Title II hereof, shall vest in the Government. The Government shall bear all risk incident to such ownership. These provisions as to title's being vested in the Government shall not operate however, to relieve the Contractor from any duties imposed upon it under the terms of this contract."
Adopted June 30, 1936, 49 Stat. 2036 et seq., 41 U.S.C. § 35 et seq.
61 Stat. 84-90, 29 U.S.C. (Supp. III) §§ 216, 251-262.
"SEC. 3. As used in this Act --"
"(d) 'Employer' includes any person acting directly 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. . . ."
(Emphasis supplied.) 52 Stat. 1060, 29 U.S.C. § 203(d) and (e).
For a review of the development of the war production program and its reliance on private industry, see Lichter v. United States, 334 U. S. 742, 334 U. S. 758-766.
"The Company . . . is responsible to the United States Government for ammunition production, to the City of St. Louis in maintaining a successful civic enterprise, and to our employees, for the establishment of working conditions conducive to the health and happiness of each man and woman employed in the plant."
"In the final analysis, your wages come from the United States Government, whose only source of income is taxes collected from you and all other citizens. The United States Cartridge Company is merely managing the plant for the Federal Government."
"When production demands require a longer work day, or longer work week, the Company will pay the legal overtime rate as provided under the Walsh-Healey Act, and the Fair Labor Standards Act."
See the dissenting opinion of Circuit Judge Hutcheson in Kennedy v. Silas Mason Co., 164 F.2d 1016, 1019-1020, the reasoning of which is in accord with our decision: "Here, the whole elaborate system was designed and operated so that the United States should not be the employer." 164 F.2d at 1020. Cf. Curry v. United States, 314 U. S. 14, and Alabama v. King & Boozer, 314 U. S. 1. Those cases held that the contractors, under Government cost plus a fixed fee contracts, were, as such, subject to state use taxes and state sales taxes.
"(b) It is hereby declared to be the policy of this Act, through the exercise by Congress 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 employment or earning power."
(Emphasis supplied.) 52 Stat. 1060, 29 U.S.C. § 202.
"labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general wellbeing of workers. . . ."
"While manufacture is not of itself interstate commerce, the shipment of manufactured goods interstate is such commerce, and the prohibition of such shipment by Congress is indubitably a regulation of the commerce. . . . It is conceded that the power of Congress to prohibit transportation in interstate commerce includes noxious articles, Lottery Case, supra, [188 U.S. 321]; Hipolite Egg Co. v. United States, 220 U. S. 45; cf. 227 U. S. United States, supra, [227 U.S. 308]; stolen articles, Brooks v. United States, 267 U. S. 432; kidnapped persons, Gooch v. United States, 297 U. S. 124, and articles such as intoxicating liquor or convict made goods, traffic in which is forbidden or restricted by the laws of the state of destination. Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U. S. 334."
"Whatever their motive and purpose, regulations of commerce which do not infringe some constitutional prohibition are within the plenary power conferred on Congress by the Commerce Clause. Subject only to that limitation, . . . we conclude that the prohibition of the shipment interstate of goods produced under the forbidden substandard labor conditions is within the constitutional authority of Congress."
"The obvious purpose of the Act was not only to prevent the interstate transportation of the proscribed product, but to stop the initial step toward transportation, production with the purpose of so transporting it."
United States v. Darby, supra, at 312 U. S. 113, 312 U. S. 115, 312 U. S. 117.
For further legislative history of the Act, see Roland Electrical Co. v. Walling, 326 U. S. 657, 326 U. S. 668-669, n. 5.
"SEC. 6. (a) Every employer shall pay to each of his employees who is engaged in commerce or in the production of goods for commerce [certain minimum wages]. . . ."
"SEC. 7. (a) No employer shall, except as otherwise provided in this section, employ any of his employees who is engaged in commerce or in the production of goods for commerce [longer than certain maximum hours]. . . ."
52 Stat. 1062, 1063, 29 U.S.C. §§ 206(a) and 207(a).
E.g., Edwards v. California, 314 U. S. 160; Gooch v. United States, 297 U. S. 124; Thornton v. United States, 271 U. S. 414; Brooks v. United States, 267 U. S. 432; United States v. Hill, 248 U. S. 420; Caminetti v. United States, 242 U. S. 470. See also United States v. South-Eastern Underwriters Assn., 322 U. S. 533, 322 U. S. 549; Bell v. Porter, 159 F.2d 117, 118-119.
"SEC. 15. (a) . . . it shall be unlawful for any person --"
"(1) to transport, offer for transportation, ship, deliver, or sell in commerce, or to ship, deliver, or sell with knowledge that shipment or delivery or sale thereof in commerce is intended, any goods in the production of which any employee was employed in violation of section 6 [minimum wages] or section 7 [maximum hours]. . . ."
"SEC. 16. (a) Any person who willfully violations any of the provisions of section 15 shall, upon conviction thereof, be subject to a fine of not more than $10,000, or to imprisonment for not more than six months, or both. . . ."
(Emphasis supplied.) 52 Stat. 1068, 1069, 29 U.S.C. §§ 215(a)(1) and 216(a).
"Irrespective of the question as to who is the ultimate consumer, however, it is our opinion that the employees of the container manufacturer are subject to the act. The fact that products lose their character as 'goods' when they come into the actual physical possession of the ultimate consumer does not affect the coverage of the act as far as the employees producing the products are concerned. The facts at the time that the products are being produced determine whether an employee is engaged in the production of goods for commerce, and, at the time of the production of the containers, they were clearly 'goods' within the meaning of the statute, since they were not, at that point of time, in the actual physical possession of the ultimate consumer. All that the term 'goods' quoted above is intended to accomplish is to protect ultimate consumers, other than producers, manufacturers, or processors of the goods in question from the 'hot goods' provision of section 15(a)(1). This seems clear from the language of the statute. . . . But Congress clearly did not intend to permit an employer to avoid the minimum wage and maximum hours standards of the act by making delivery within the State into the actual physical possession of the ultimate consumer who transports or ships the goods outside the State. Thus, it is our opinion that employees engaged in building a boat for delivery to the purchaser at the boat yard are within the coverage of the act if the employer, at the time the boat is being built, intends, hopes, or has reason to believe that the purchaser will sail it outside the State."
"Provided, That the provisions of this subsection (c) shall not apply to any employer who shall have entered into an agreement with his employees pursuant to the provisions of paragraphs 1 or 2 of subsection (b) of section 7 of an Act entitled 'Fair Labor Standards Act of 1938.'"
56 Stat. 277, 41 U.S.C. § 35(c). Those paragraphs relate to collective bargaining agreements covering 26 or 52 consecutive work weeks and exempting the employer making them from charges of violation of the usual maximum hour provisions of the Fair Labor Standards Act. This amendment thus recognized the application of the Fair Labor Standards Act to employment to which the Walsh-Healey Act also applied.
See Pyramid Motor Corp. v. Ispass, 330 U. S. 695; Levinson v. Spector Motor Service, 330 U. S. 649; Southland Gasoline Co. v. Bayley, 319 U. S. 44; Overnight Motor Transport Co. v. Missel, 316 U. S. 572; United States v. American Trucking Assns., 310 U. S. 534.
"SECTION 1. (a) The Congress hereby finds that the Fair Labor Standards Act of 1938, as amended, has been interpreted judicially in disregard of long established customs, practices, and contracts between employers and employees, thereby creating wholly unexpected liabilities, immense in amount and retroactive in operation, upon employers, with the results that, if said Act as so interpreted or claims arising under such interpretations were permitted to stand, . . .(9) the cost to the Government of goods and services heretofore and hereafter purchased by its various departments and agencies would be unreasonably increased and the Public Treasury would be seriously affected by consequent increased cost of war contracts . . ."
"The Congress further finds and declares that all of the results which have arisen or may arise under the Fair Labor Standards Act of 1938, as amended, as aforesaid, may (except as to liability for liquidated damages) arise with respect to the Walsh-Healey and Bacon-Davis Acts, and that it is therefore in the national public interest and for the general welfare, essential to national defense, and necessary to aid, protect, and foster commerce, that this Act shall apply to the Walsh-Healey Act and the Bacon-Davis Act."
(Emphasis supplied.) 61 Stat. 84-85, 29 U.S.C. (Supp. III) § 251(a).
The 1949 amendments to the Fair Labor Standards Act, including especially the increase of minimum wages from 40 cents to 75 cents and hour, demonstrate, however, the growing importance of the application of the Fair Labor Standards Act. 63 Stat. 446, 910-920, 29 U.S.C. (Supp. III) § 202, et seq., especially § 206(a)(1).
This Statement of Labor Policy was emphasized by counsel for the respondent in the Aaron case. Much of it is published in Regulations -- Army: Ordnance Procurement Instructions, 2 CCH War Law Serv. §§ 9,101.1, 9,104.3, 9,104.4, 9,105.2 and 9,105.3.
called upon to give a sympathetic construction to the Fair Labor Standards Act. We do not here have a controversy involving relations between a capitalist employer and his employees. The real controversy is between the Department of the Army, which conceived, formulated, and administered a scheme for the production of war materiel by means of Government-owned plants, and the Wage and Hour Division of the Department of Labor, which administers the Fair Labor Standards Act. We do not have here, in short, the resistance of private employers to the demands of their employees. Here, a vast claim on the Treasury of the United States is in issue. The issue should be decided in light of the fact that Congress has manifested in the most emphatic way that the Fair Labor Standards Act is not to be stretched to the extent that sophistical argumentation can stretch its scope, but is to be applied in a commonsensical way. [Footnote 2/1] Fine distinctions in the application of the statute can hardly be avoided. That makes it all the more necessary to hew close to the line marked out by the specific facts of the cases before us. The caution that general propositions do not decide concrete cases is particularly to be heeded in dealing with an enactment framed in terms of legal categories having diverse and conflicting contents. It begs the real question to purport to solve a particular problem merely by invoking such a category.
Not only is it important to be heedful of what these cases are really about; it is no less important to be mindful of what they are not about. The problem before us is not the applicability of the Fair Labor Standards Act to work done under all Government contracts, or even to work under all varieties of war production contracts, cost plus fixed fee or otherwise. What is involved is the particular kind of cost plus fixed fee contracts for the operation of ordnance plants under the Act of July 2, 1940, which authorized the Secretary of War to provide for the operation of such plants "through the agency of selected qualified commercial manufacturers." [Footnote 2/2] 54 Stat. 713, 50 U.S.C. App. § 1171(b).
An analysis of the nature of the interrelationship of Government, contractor and employees is necessary to put the issues in their proper perspective. The facts are substantially the same in all three cases, but, since the findings in No. 79, Aaron v. Ford, Bacon & Davis, Inc., are particularly detailed, further discussion will center on that case.
as well. The contract was terminable at will by the Government, and, under it, the "normal factors which go to make up commercial profit are lacking." War and Navy Departments' Statement of Labor Policy Governing Government-Owned, Privately Operated Plants (1942), digested in 2 CCH War Law Serv. 24,862 et seq. The United States owned all materials and equipment used in connection with the operation of the plant. Ninety-five percent were furnished by the Government directly; the remainder was obtained by the contractor after approval by the Government. The United States obtained title to the latter purchases at the point of origin, and shipment to the plant was on Government bills of lading at a reduced rate and without payment of transportation tax. Title to all materials, equipment, and work in process in the plant was at all times in the United States. Finished products were shipped out of Arkansas to military facilities on Government bills of lading.
Under the contract, the Government paid all expenses of operating the plant, including labor costs. The contractor was even allowed costs of production of munitions that did not meet specifications and could not be used. The Government contracted for electric power, telephone, teletype, and telegraph services itself and paid the bills directly, and provided employees traveling on business with tax-free transportation tickets. At no time did the contractor have to advance its own money -- expenses were paid out of available Government funds. For its services in operating the plant, the contractor was paid a fixed fee.
"which, in the opinion of either the Secretary of War or the Secretary of the Navy, will have the effect of restricting or hampering maximum output."
the control and constitute employees of the Contractor," the Government retained the right to approve or disapprove the employment of all personnel, and could require the dismissal of any employee deemed "incompetent or whose retention is deemed to be not in the public interest." No key employee could be assigned to service until the Contracting Officer approved a statement submitted to him on the employee's previous and proposed salary, qualifications, and experience. All wage and salary rates and other changes in status were subject to Government approval, and the Government audited in advance of payment all time cards and payrolls, and witnessed the actual payment to employees. The requirement of approval of wage rates was neither a dead letter nor a formality. Proposed wage scales were, in fact, rejected by the War Department.
"prevailing minimum wages for persons employed on similar work or in the particular or similar industries or groups of industries currently operating in the locality in which the materials, supplies, articles, or equipment are to be manufactured or furnished."
"an additional equal amount as liquidated damages. . . . The court in such action shall, in addition to any judgment awarded to the plaintiff . . . , allow a reasonable attorney's fee to be paid by the defendant, and costs of the action."
"existing suits and potential suits . . . may in the aggregate exceed $250,000,000, substantially all of which will be reimbursable to the contractor. [Footnote 2/4]"
The Court creates such a drain on the Treasury by imputing to the Congress which enacted the Fair Labor Standards Act -- and which, of course, could not possibly have foreseen the cost plus fixed fee arrangements involved here -- the intention, in effect, to open the Treasury not only to huge claims for overtime, but in addition to demands for like amounts as "liquidated damages" and attorney's fees. In the absence of a shred of evidence to indicate that Congress contemplated such a result or would have countenanced it, I cannot bring myself to attribute to Congress the desire to place such a double burden upon the fisc.
Certainly such a result should have a more salient justification than abstract argumentation about words not having fixed scope or function. Our decisions have made one thing clear about the Fair Labor Standards Act: its applicability is not fixed by labels that parties may attach to their relationship, nor by common law categories, nor by classifications under other statutes. Rutherford Food Corp. v. McComb, 331 U. S. 722; Walling v. Portland Terminal Co., 330 U. S. 148, 330 U. S. 150; McComb v. McKay, 164 F.2d 40; cf. United States v. United Mine Workers, 330 U. S. 258, 330 U. S. 285-286. Unless we are to disregard this guidance of wisdom in construing so dynamic a code as the Fair Labor Standards Act, designation in the contracts of the contractors as the "employers"
of the personnel in the ordnance plants cannot be decisive. Again, the bare words of the definitions in that Act, never self-applying in particular cases, are especially inconclusive here because the cost plus fixed fee arrangements adopted for the operation of these plants were of such an unprecedented character. We are dealing with economic arrangements which, in their scope and incidence, were aptly characterized by the War and Navy Departments' Statement of Labor Policy: "The industrial units thus created are unique." In such unique situations especially, we should heed our admonition against perverting "the process of interpretation by mechanically applying definitions in unintended contexts." Farmers Reservoir & Irrigation Co. v. McComb, 337 U. S. 755, 337 U. S. 764. In law, as elsewhere, words of many-hued meanings derive their scope from the use to which they are put.
"in industries engaged in commerce or in the production of goods for commerce . . . labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general wellbeing of workers."
were paid, and the power of the Government to withhold payments otherwise due the contractor or to sue for departure from specified standards and use the recovery to compensate aggrieved employees furnished a scheme of safeguards to assure fair dealing.
"result in an impairment of the jurisdiction of the National Labor Relations Board over war plants or cause a substantial legal doubt to be cast upon such jurisdiction."
departments, acting under legal advice, that a concession as to a statute's applicability was an expedient step in the war production program is to disregard the justification for utilizing "administrative interpretation" as a gloss on ambiguous legislation.
The Government exerted close supervision over every phase of operations at these ordnance plants, specifying articles to be manufactured, production quotas and methods of production. Government control was particularly dominant with respect to personnel policies, including phases of hiring and firing, job assignments, working conditions, wage rates, and overtime compensation. The investment in plant and facilities was entirely the Government's, and the Government bore all the expenditures and all the risks of operation. As between the contractors and the workers, the operation was wanting in the characteristic aspects of the normal employer-employee relation. In view of these factors and the applicability of the Walsh-Healey Act, with its protective features for plant personnel, I see no basis for attributing to Congress the intention to make these contractors "employers" within the meaning of the Fair Labor Standards Act when such a result would have fiscal consequences neither foreseen nor, on any reasonable assumption, desired by Congress. Cf. United States v. Wittek, 337 U. S. 346. Since the United States is not an "employer" within the meaning of the statute, the overtime provisions are inapplicable.
These considerations call for affirmance without discussion of other grounds which have been advanced for sustaining the judgments below, some of which, at least, have commended themselves to several Courts of Appeals.
Congress found that the construction which this Court placed upon the Fair Labor Standards Act in Jewell Ridge Coal Corp. v. Local No. 6167, 325 U. S. 161; Anderson v. Mt. Clemens Pottery Co., 328 U. S. 680; Bay Ridge Operating Co. v. Aaron, 334 U. S. 446; Brooklyn Savings Bank v. O'Neil, 324 U. S. 697, and Farmers Reservoir and Irrigation Co. v. McComb, 337 U. S. 755, misconceived the purposes of Congress. See Portal-to-Portal Act of 1947, 61 Stat. 84, 29 U.S.C. (Supp. III) § 251 et seq.; Act of July 20, 1949, 63 Stat. 446, 29 U.S.C. (Supp. III) § 207(e)(1, 2), (f); Fair Labor Standards Amendments of 1949, §§ 11, 14, 63 Stat. 910, 917, 919, 29 U.S.C. (Supp. III), §§ 213, 216.
The Secretary of the Navy was authorized to enter into contracts for private operation of Navy installations on a cost plus fixed fee basis by §§ 2(a) and 8(b) of the Act of June 28, 1940. 54 Stat. 677, 680, 50 U.S.C. App. §§ 1152(a)(1), 1158(b).
"Any sums of money due to the United States of America by reason of any violation of any of the representations and stipulations of said contract . . . may be withheld from any amounts due on any such contracts or may be recovered in suits brought in the name of the United States of America by the Attorney General thereof. All sums withheld or recovered as deductions, rebates, refunds, or underpayments of wages shall be held in a special deposit account and shall be paid, on order of the Secretary of Labor, directly to the employees . . . on whose account such sums were withheld or recovered."
Under the Fair Labor Standards Act, even employers who acted with the utmost good faith are liable for liquidated damages and attorneys' fees in addition to unpaid minimum wages or overtime compensation. The severe impact a large, unforeseen, nonreimbursed liability would have upon a fixed-fee contractor receiving an annual fee of $420,000 as in the Aaron case is manifest.

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