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Brooklyn Savings Bank v. O'Neil (full text) :: 324 U.S. 697 (1945) :: Justia U.S. Supreme Court Center Log In
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Brooklyn Savings Bank v. O'Neil 324 U.S. 697 (1945)
U.S. Supreme CourtBrooklyn Savings Bank v. O'Neil, 324 U.S. 697 (1945)Brooklyn Savings Bank v. O'NeilNo. 445Argued February 5, 6, 1945Decided April 9, 1945*324 U.S. 697CERTIORARI TO THE COURT OF APPEALS OF NEW YORK
7. It is unnecessary here to determine questions of the validity and effect of agreements between employer and employee in settlement of claims arising under the Act where there is a bona fide dispute between the parties. P. 324 U. S. 714. Page 324 U. S. 698
The writs of certiorari granted in these three cases present questions as to the interpretation of Section 16(b) of the Fair Labor Standards Act of 1938, 52 Stat. 1060 at 1069, which provides that an employer who violates the Page 324 U. S. 699 minimum wage and maximum hour provisions of the Act
The petitioner, Brooklyn Savings Bank, owned and operated an eleven-story office building in which the respondent was employed as a night watchman during a two year period from November 5, 1938, to August 30, 1940. Since a substantial portion of that building was Page 324 U. S. 700 devoted to the production of goods for commerce, [Footnote 2] the respondent was entitled to overtime compensation under the provisions of Section 7 of the Fair Labor Standards Act. [Footnote 3] 52 Stat. 1063. No such compensation was paid at that time. However, in November, 1942, over two years after the respondent had left petitioner's service, the petitioner computed the statutory overtime compensation due the respondent and offered him a check for $423.16 in return for a release of all of his rights under the Act. The respondent signed the release and took the check. Since this sum did not include any payment for liquidated damages provided for in Section 16(b) of the Act, the respondent subsequently instituted the present proceeding in a New York City Municipal Court to recover liquidated damages due him under Section 16(b). The complaint was dismissed on the grounds that respondent failed to prove a cause of action and also that the respondent "released any claim for liquidated damages or counsel fees." The Appellate Term reversed, per curiam, holding that respondent was employed in the production of goods for commerce within Page 324 U. S. 701 the meaning of the Fair Labor Standards Act, and was entitled therefore to recover liquidated damages by reason of petitioner's default in making overtime payments as required by Section 7 of the Act. [Footnote 4] This decision was affirmed by the New York Appellate Division [Footnote 5] and by the New York Court of Appeals. [Footnote 6] Since the New York Court of Appeals decided a federal question of substance not heretofore determined by this Court, we granted certiorari [Footnote 7] limited to the question of whether the respondent's release of all further claims and damages under the Act, given at the time he received payment of the overtime compensation due under the Act, is a defense to an action subsequently brought solely to recover liquidated damages. The jurisdiction of this Court rests on Section 237(b) of the Judicial Code.
The petitioner in this second case operated a box factory in which he employed the respondent during the period from October, 1938, the effective date of the Fair Labor Standards Act, to November, 1942, when respondent was discharged. During this period, the respondent worked hours in excess of the statutory maximums in effect during this period. Petitioner failed to pay respondent time and one-half for overtime, as required by the Act. In September, 1942, the Wage and Hour Administration procured an injunction, by consent, prohibiting the petitioner from violating the Act. In November, 1942, the petitioner tendered the respondent $500 for wages due and owing under the Act, the latter accepting the money and signing a Page 324 U. S. 702 general release of all claims against petitioner under the Act. Both parties knew at this time that more than $500 was due to respondent for minimum wages and overtime pay under the Act. Shortly thereafter, the respondent engaged counsel to recover the balance due him under the Act. Petitioner, before suit was filed, tendered the balance of the statutory wages due, but respondent refused to accept it because it did not include an equal sum for liquidated damages. Thereupon, the respondent brought suit for $276.05, the balance of the statutory wages due respondent, and $776.05, being liquidated damages equal to the whole amount ($500 plus $276.05) which had originally been unlawfully withheld. In his answer, the petitioner pleaded settlement of respondent's claim for $500, the release given by respondent pursuant to such settlement, and the petitioner's subsequent tender of a check for the deficiency in statutory minimum and overtime wages due. The District Court granted judgment for the respondent relying on Guess v. Montague, 140 F.2d 500, which held invalid a settlement agreement on the part of employees to accept less than the statutory minimum wage. [Footnote 8] The Circuit Court of Appeals for the Fourth Circuit affirmed. [Footnote 9]
The petition in No. 445 raises the question of whether an employee, accepting from his employer a delayed payment Page 324 U. S. 703 of the basic statutory wages due under the Act, can validly release and waive and further right to recover liquidated damages under the provisions of Section 16(b). [Footnote 11] A preliminary question arises as to whether respondent's release was given in settlement of a bona fide dispute between the parties with respect to coverage or amount due under the Act, or whether it constituted a mere waiver of his right to liquidated damages. The state courts made no findings of fact on this issue. Where a state court fails to pass on evidence or make findings of fact because under their respective views the fact referred to are immaterial, we are not relieved from the duty of examining the evidence for the purpose of determining what facts reasonably might be, and presumably would be, found therefrom by the state court. Merchants' Nat. Bank v. Richmond, 256 U. S. 635, 256 U. S. 638; Carlson v. Curtiss, 234 U. S. 103, 234 U. S. 105; cf. United Gas Co. v. Texas, 303 U. S. 123, 303 U. S. 143, 625; Creswill v. Knights of Pythias, 225 U. S. 246, 225 U. S. 261. We think the record in this case shows that the release was not given in settlement of a bona fide dispute between employer and employee. Petitioner undertook to pay the respondent after our decision in Kirschbaum v. Walling, 316 U. S. 517, which determined the applicability of the Fair Labor Standards Act to building operators like the petitioner. Petitioner's answer in the Municipal Court merely relied upon payment of the statutory liability and the release of other claims. With the exception of the recital in the release, there is nothing in the record which shows that the respondent's release was obtained as the result of the settlement of a bona fide dispute between the parties with respect to coverage or amount. [Footnote 12] Moreover, the decision by the New York Appellate Division was based on Rigopoulos Page 324 U. S. 704 v. Kervan, 140 F.2d 506, which involved waiver of right to liquidated damages in the absence of a bona fide dispute and which expressly reserved decision on the question of validity of a settlement where there was such a dispute between the parties. The issue presented in No. 445, therefore, is whether, in the absence of a bona fide dispute between the parties as to liability, respondent's written waiver of his right to liquidated damages under Section 16(b) bars a subsequent action to recover liquidated damages. We are of the opinion that it does not bar such claim. [Footnote 13]
It has been held in this and other courts that a statutory right conferred on a private party, but affecting the public interest, may not be waived or released if such waiver or release contravenes the statutory policy. Midstate Horticultural Co. v. Pennsylvania R. Co., 320 U. S. 356, 320 U. S. 361; Phillips v. Grand Trunk Western R. Co., 236 U. S. 662, 236 U. S. 667. Cf. Young v. Higbee Co., 324 U. S. 204. Where a private right is granted in the public interest to effectuate a legislative policy, waiver of a right so charged or colored with the public interest will not be allowed where it would thwart the legislative policy which it was designed to effectuate. [Footnote 14] With respect to private rights Page 324 U. S. 705 created by a federal statute, such as Section 16(b), the question of whether the statutory right may be waived depends upon the intention of Congress as manifested in the particular statute. As was stated in Midstate Horticultural Co. v. Pennsylvania R. Co., 320 U. S. 356, 320 U. S. 360, " . . . whether the policy of . . . [the] legislation contemplates the one result or the other . . . is the controlling question."
Neither the statutory language, the legislative reports, [Footnote 15] nor the debates [Footnote 16] indicates that the question at issue was Page 324 U. S. 706 specifically considered and resolved by Congress. In the absence of evidence of specific Congressional intent, it becomes necessary to resort to a broader consideration of the legislative policy behind this provision as evidenced by its legislative history and the provisions in and structure of the Act. See Tennessee Coal Co. v. Muscoda Local, 321 U. S. 590, 321 U. S. 597; United States v. Darby, 312 U. S. 100, 312 U. S. 117-118, 312 U. S. 122-123. Such consideration clearly shows that Congress did not intend that an employee should be allowed to waive his right to liquidated damages.
The legislative history of the Fair Labor Standards Act shows an intent on the part of Congress to protect certain groups of the population from substandard wages and excessive hours which endangered the national health and wellbeing and the free flow of goods in interstate commerce. [Footnote 17] The statute was a recognition of the fact that, due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency and as a result the free movement of goods in interstate Page 324 U. S. 707 commerce. [Footnote 18] To accomplish this purpose, standards of minimum wages and maximum hours were provided. Neither petitioner nor respondent suggests that the right to the basic statutory minimum wage could be waived by any employee subject to the Act. No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act. We are of the opinion that the same policy considerations which forbid waiver of basic minimum and overtime wages under the Act also prohibit waiver of the employee's right to liquidated damages.
We have previously held that the liquidated damage provision is not penal in its nature, but constitutes compensation for the retention of a workman's pay which might result in damages too obscure and difficult of proof for estimate other than by liquidated damages. Overnight Motor Transp. Co. v. Missel, 316 U. S. 572. It constitutes a Congressional recognition that failure to pay the statutory minimum on time may be so detrimental to maintenance of the minimum standard of living "necessary for health, efficiency, and general wellbeing of workers" [Footnote 19] and to the free flow of commerce that double payment must be made in the event of delay in order to insure restoration of the worker to that minimum standard of wellbeing. [Footnote 20] Employees Page 324 U. S. 708 receiving less than the statutory minimum are not likely to have sufficient resources to maintain their wellbeing and efficiency until such sums are paid at a future date. The same policy which forbids waiver of the statutory minimum as necessary to the free flow of commerce requires that reparations to restore damage done by such failure to pay on time must be made to accomplish Congressional purposes. Moreover, the same policy which forbids employee waiver of the minimum statutory rate because of inequality of bargaining power prohibits these same employees from bargaining with their employer in determining whether so little damage was suffered that waiver of liquidated damage is called for. This conclusion is in accord with decisions of the majority of the federal courts that have considered this question. [Footnote 21] This result, Page 324 U. S. 709 moreover, avoids the difficult problems of allocation that would arise in numerous cases where a lump sum was paid for back wages and waiver of right to liquidated damages and where issue was subsequently raised as to whether there had been full payment of the basic minimum and overtime wages specified in the Act. Nor does the instant case involve exceptional circumstances of the kind held to justify a waiver agreement such as was upheld in Fort Smith & W. R. Co. v. Mills, 253 U. S. 206.
The private-public character of this right is further borne out by an examination of the enforcement provisions of the Act. Although the difficulties of enforcement under the Act were recognized, [Footnote 22] the Administrator was given limited enforcement powers. Criminal prosecution was available only for willful violations -- difficult to prove. Section 16(a). The Administrator's civil remedy lay by way of suit for an injunction, which, by its nature, tends to be prospective in operation. No power was vested in the Administrator to bring an action at law to obtain payment of minimum wages left unpaid and to recover damages arising from delay in payment. Sole right to bring such suit was vested in the employee under Section 16(b). Although this right to sue is compensatory, it is nevertheless an enforcement provision. [Footnote 23] And not the least effective aspect of this remedy is the possibility that an employer who gambles on evading the Act will be liable for payment not only of the basic minimum originally due, but also damages equal to the sum left unpaid. To permit an employer to secure a release from the worker Page 324 U. S. 710 who needs his wages promptly will tend to nullify the deterrent effect which Congress plainly intended that Section 16(b) should have. Knowledge on the part of the employer that he cannot escape liability for liquidated damages by taking advantage of the needs of his employees tends to insure compliance in the first place. To allow contracts for waiver of liquidated damages approximates situations where courts have uniformly held that contracts tending to encourage violation of laws are void as contrary to public policy. [Footnote 24]
The provisions of the statute reflect the policy considerations, discussed above, which prohibit waiver of the right to liquidated damages. Sections 7(a) and 16(b) are mandatory in form. In terms, they direct that the Page 324 U. S. 711 employer shall not employ a worker longer than the specified time without payment of overtime compensation, and that, upon violation of this provision, the employer shall be liable for statutory wages and liquidated damages. One section, Section 16(b), creates the obligation for the entire remedy. Collection of both wages and damages is left to the employee. [Footnote 26]
Respondent argues that Section 16(b) indicates that the right to liquidated damages arises only if the employee is compelled to sue for minimum wages due. Section 16(b) in no way bears out this interpretation. [Footnote 27] It provides absolutely that the employer shall be liable for liquidated damages in an amount equal to minimum wages overdue; liability is not conditioned on default at the time suit is begun. It is also argued that the elimination from a predecessor bill of a provision prohibiting waiver of the provisions of the Act indicates a Congressional intent to allow an employee to waive his claim to liquidated damages. [Footnote 28] Page 324 U. S. 712 But such a contention proves too much. It applies with equal force to the right to minimum wages. Such an interpretation would nullify the effectiveness of the Act. It is also suggested that the failure to impose criminal sanctions for the violation of the liquidated damage provisions or to authorize an injunction to prevent their violation manifests a difference in Congress' attitude toward the waiver of the employee's right to the basic statutory wage, as compared with his right to liquidated damages. But there is no reason for making an employer subject to a criminal penalty or an injunction for failure to pay liquidated damages. They are collectible as private damages by the employee for failure to obey the same requirements as to wages which are punished and controlled, so far as the purely public interest is concerned, by criminal sanctions and injunction.
Petitioner relies on the fact that various other federal statutes authorizing employees to sue for wages or for damages arising from injuries sustained in the course of employment contain specific provisions prohibiting waiver of rights under the acts involved, or provide means by which compromises and settlements can be approved. [Footnote 29] Page 324 U. S. 713 There is no indication why Congress did not embody a similar provision in the Act under consideration in this case. Absence of such provisions, however, has not prevented the courts from invalidating waivers where the legislative policy would be thwarted by permitting such contracts. [Footnote 30] The decision in the instant case is based on the legislative policy behind this enactment, and issues arising under other acts having different legislative backgrounds are not conclusive in determining the legislative intent with respect to the Fair Labor Standards Act. Failure to provide a method of waiving claims under the Act can support contrary inferences, that such waivers were to be allowed or that the provisions of the Act state a settled policy which cannot be modified by private contracts. We are of the opinion that the legislative history and provisions of the Act support a view prohibiting such waiver. As was stated in West Coast Hotel Co. v. Parrish, 300 U. S. 379, 300 U. S. 397,
The invalidity of the release or waiver in No. 445 makes the release and waiver involved in No. 554 a fortiori invalid. In the latter case, both the federal District Court [Footnote 31] and the Circuit Court of Appeals [Footnote 32] found "that both parties knew more than $500.00 was due . . . " at the time the petitioner tendered $500 to the respondent in return for a comprehensive release covering all of the respondent's claims against the petitioner employer. Thus, in that case, the employer and employee attempted by means of that release to waive the right to the basic statutory minimum, as well as the right to liquidated damages. This Page 324 U. S. 714 attempted release and waiver of rights under the Act was absolutely void. See Smith v. McCullough, 270 U. S. 456, 270 U. S. 465. When petitioner attempted to pay the additional sum due as a statutory minimum, the respondent refused to accept payment, thus there was no valid settlement which would operate to bar the respondent employee's right to recover the balance of the statutory minimum wage still due and liquidated damages equal in amount to the entire sum of wages which the employer had not paid promptly.
There remains to be considered the question whether an employee recovering minimum wages and liquidated damages under the provisions of Section 16(b) is also entitled to interest on the sums so recovered. [Footnote 33] We granted certiorari in No. 421 [Footnote 34] to the Circuit Court of Appeals for Page 324 U. S. 715 the Second Circuit, limited to the question of the propriety of allowing interest on recoveries of unpaid overtime compensation and liquidated damages under the Act. Certiorari was granted because this court decided an important federal question of substance which had not previously been determined by this Court. The jurisdiction of this Court in No. 421 rests on Section 240(a) of the Judicial Code.
We are of the opinion that the question of the right to interest on sums recoverable under the provisions of Section 16(b) of the Act constitutes a question of federal, not local, law. Board of Commissioners v. United States, 308 U. S. 343, 308 U. S. 349-350; see Prudence Realization Corp. v. Geist, 316 U. S. 89, 316 U. S. 95; Garrett v. Moore-McCormack Co., 317 U. S. 239. Interest is not recoverable in judgments obtained under Section 16(b). As was indicated in our decision in Overnight Motor Co. v. Missel, supra, Section 16(b) authorizes the recovery of liquidated damages as compensation for delay in payment of sums due under the Act. Since Congress has seen fit to fix the sums recoverable for delay, it is inconsistent with Congressional intent to grant recovery of interest on such sums in view of the fact that interest is customarily allowed as compensation for delay in payment. To allow an employee to recover the basic statutory wage and liquidated damages, with interest, would have the effect of giving an employee double compensation for damages arising from delay in the payment of the basic minimum wages. See Royal Indemnity Co. v. United States, 313 U. S. 289, 313 U. S. 296. Allowance of interest on minimum wages and liquidated damages recoverable under Section 16(b) tends to produce the undesirable result of allowing interest on interest. See Cherokee Nation v. United States, 270 U. S. 476, 270 U. S. 490. Congress, by enumerating the sums recoverable Page 324 U. S. 716 in an action under Section 16(b), meant to preclude recovery of interest on minimum wages and liquidated damages. [Footnote 35]
We find nothing in the Fair Labor Standards Act to prevent the effective operation of such a release upon the cause of action for liquidated damages more than any other. Section 16(b) of the Act authorizes the employee to recover liquidated damages from an employer who violates the duty imposed by §§ 6 and 7 of the Act to pay the prescribed minimum and overtime wages. That duty is expressed in §§ 6 and 7 in terms of a command to the Page 324 U. S. 717 employer. Willful failure to obey it is made a criminal offense by §§ 15(a)(2) and 16(a), and authority to enjoin violations of §§ 6 and 7 is given by §§ 15 and 17.
This pointed difference in the treatment of the two classes of claims is underscored by the complete lack of Page 324 U. S. 718 any legislative history suggesting that there was any Congressional purpose to treat alike the two classes of claims which it treated so differently in the statute. In its progress through Congress, there was stricken from the bill, which was finally enacted as the Fair Labor Standards Act, a clause providing that any agreement for waiver of compliance with any provision of the Act should be void. Section 17(b), S. 2475, as passed by Senate, 75th Cong., 1st Sess., 1937. With this provision eliminated, the mandatory terms of §§ 6 and 7, the criminal penalties of the Act, and its provision for relief in equity, afford the sole ground to be found either within or without the statute for any inference of a Congressional policy against the release of claims arising under the Act. These factors concern only the minimum and overtime wages. They neither support nor suggest any Congressional policy against release of liquidated damages, to which they are inapplicable and wholly unrelated.
We held in Overnight Motor Transp. Co. v. Missel, 316 U. S. 572, that the provision for liquidated damages is not punitive. Hence, it cannot, in itself, be said either to have created or sanctioned a public right or interest in the recovery of liquidated damages. In view of the uncertain Page 324 U. S. 719 coverage of the Act, we cannot ignore the fact that the statutory liability may be harsh in its application and enable the employee to recover an amount far in excess of any damage which he has in fact suffered. All these considerations persuasively suggest that Congress has adopted no policy which precludes the employee from releasing, as in the case of other claims, the claim for liquidated damages when the release conforms to local law and is procured without overreaching or unfairness.