Case Name: McCOMB, Adm'r of Wage and Hour Div., U. S. Dept. of Labor, v. UTICA KNITTING CO.
Court: United States Court of Appeals for the Second Circuit
Jurisdiction: United States
Decision Date: 1947-11-19
Citations: 164 F.2d 670
Docket Number: No. 49, Docket 20715
Parties: McCOMB, Adm’r of Wage and Hour Div., U. S. Dept. of Labor, v. UTICA KNITTING CO.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 164
Pages: 670–679

Head Matter:
McCOMB, Adm’r of Wage and Hour Div., U. S. Dept. of Labor, v. UTICA KNITTING CO.
No. 49, Docket 20715.
Circuit Court of Appeals, Second Circuit
Nov. 19, 1947.
Rehearing Denied Dec. 18, 1947.
CLARK, Circuit Judge, dissenting in part.
William S. Tyson, Sol., Bessie Margolin, Asst. Sol., Morton Liftin, Acting Asst. Sol., and Frederick U. Reel, and Morton Liftin, Attys., U. S. Department of Labor, all of Washington, D.C. (John A. Hughes, Regional Atty., of New York City, of counsel), for plaintiff.
Ferris, Burgess, Hughes & Dorrance, of Utica, N. Y. (Thayer Burgess and Russell G. Dunmore, Jr., both of Utica, N. Y. of counsel), for Utica Knitting Co.
Before AUGUSTUS N. HAND, CLARK,, and FRANK, Circuit Judges.

Opinion:
FRANK, Circuit Judge.
This is an action for an injunction to prevent defendant from violating the Fair Labor Standards Act, 29 U.S.CA.. § 201 et seq., with respect to 59 of defendant's employees out of a total which varies from 2,200 to 3,000. As the district judge found, defendant, which manufactures, sells and distributes textile products, operates nine mills; it "produces a fluctuating percentage of its capacity, depending upon factors which seem to be common to the textile industry."
1. As to 14 of the 59 employees in question, defendant asserted in the district court, that they were not within the coverage of the Act because they serve in a "bona fide executive capacity" within the meaning of § 13(a) (1) and the Regulations made, pursuant thereto, by the Administrator. *The district judge held that but one of these persons was within the exemption. Defendant appeals from that part of the judgment against it which relates to 5 of the other 13 employees.
The district court found as a fact that defendant had not affirmatively proved that, of these five, two, who are mill foremen, "spent not to exceed 20 percent of the number of hours worked in the workweek by the non-exempt employees under their direction in doing work of the same nature as that performed by non-exempt employees." As there is ample evidence to support this finding, it is not "clearly erroneous." Accordingly, defendant, which had the burden of proof, did not show that these employees came under clause (f) of the pertinent Regulations. As to the other three employees, operating engineers in defendant's power plant, the district court found that they "were operating engineers or turbine operators, whose primary duty was the operation and maintenance of important, valuable and complicated machinery. Supervision of firemen and other employees was secondary to their main duty. Their primary duty does not consist in the management of a department of the establishment in which they are employed."
"Sec. 541.1 Executive. The term 'employee employed in a bona fide executive capacity' in Section 13(a) (1) of the Act shall mean any employee,
"(a) whose primary duty consists of the management of the establishment in which he is employed or of a customarily recognized department or subdivision thereof and
"(b) who customarily and regularly directs the work of other employees therein, and
"(c) who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status of other employees will be given particular weight, and
"(d) who customarily and regularly exercises discretionary powers, and
"(e) who is compensated for his services on a salary basis at not less than $30 per week (exclusive of board, lodging, or other facilities), and
On the evidence, this finding must be sustained. Consequently, these men did not come under clause (a) of the pertinent Regulations. As to these five employees, the judgment is affirmed.
2. Forty-five other employees are paid guaranteed salaries under a so-called guaranteed-salary plan. This plan, which came into existence in October or November, 1940, is expressed in letters signed by these persons, of which the following is typical: "This will confirm the previous verbal understanding between us relative to my wages. I am receiving a guaranteed weekly salary of $59 per week for a scheduled work week of 45 hours. My hourly rate is $1.242 per hour for the first 40 hours and time and a half or $1.863 per hour for each hour worked in excess of 40 hours per week. If I work less than my scheduled 45 hours in any work week, I receive my guaranteed weekly salary of $59. If I work over my scheduled 45 hours in any work week, I receive $1.863 per hour in addition to my guaranteed weekly, salary of $59. In addition to the above base and overtime pay, I receive any production bonus to which I may be entitled." Plaintiff contends that payments under this plan do not comply with the overtime requirements of § 7(a) of the Act. *The district court held that the plan did not meet the statutory requirements in so far as it applied to any of the 45 employees whose average hourly earnings, before they were "placed on the plan," were greater than the hourly rates under the plan, but that the plan was valid as to the remainder of the 45, whether they had previously worked for the defendant or were first hired after the plan became effective. The court entered judgment based on these conclusions. Defendant appeals from that portion of the judgment holding the plan partly invalid, and plaintiff cross-appeals from that portion holding the plan partly valid.
"(f) whose hours of work of the same nature as that performed by non-exempt employees do not exceed 20 per cent of the number of hours worked in the work week by the non-exempt employees under his direction: Provided, That this paragraph shall not apply in the case of an employee who is in sole charge of an independent establishment or a physically separated branch establishment."
Our decision must turn on the applicability of Walling v. A. H. Belo Corp., 316 U.S. 624, 62 S.Ct. 1223, 86 L.Ed. 1716, in which the Court, because of a guarantee, significantly refused to apply the doctrine, and the "regular rate" formula, announced the same day in Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682. Before the recent decisions in Walling v. Halliburton Oil Well Cementing Co., 331 U.S. 17, 67 S.Ct. 1056, and 149 Madison Ave. Corp. v. Asselta, 331 U.S. 199, 67 S.Ct. 1178, several circuit courts, including this court, had intimated that, in the light of decisions subsequent to Belo— i. e., Walling v. Helmerich & Payne, 323 U.S. 37, Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 65 S.Ct. 1242, 89 L.Ed. 1705; Walling v. Harnischfeger Corp., 325 U.S. 427, 65 S.Ct. 1246, 89 L.Ed. 1711, 65 S.Ct. 11, 89 L.Ed. 29; — the Supreme Court had narrowed the Belo doctrine almost to the vanishing point. But the opinion in Halliburton, and comments on Belo and Halliburton in Asselta, showed that this view was mistaken. As an intermediate appellate court, occupying a satellite position with a restricted orbit, it is our function to interpret not the statute directly but the Supreme Court's interpretation of the statute. We must, therefore, now take the Belo doctrine as an established gloss on the Act, one which constitutes an exception to the usual rule — as to the actual "regular rate" — announced in the Missel, Helmerich & Payne, Youngerman-Reynolds and Harnischfeger cases. In other words, a contract rate which, in line with those cases, would otherwise be deemed an artificial regular rate, is not so when the contract provides for a guarantee a la Belo, So here, several facts which undoubtedly would have invalidated the contracts will not do so, if, because of the guarantee, the contracts come within the Belo exception.
We incline to believe that that exception has these limits indicated in the Belo opinion (316 U.S. 635, 62 S.Ct. 1229, 86 L.Ed. 1716) : The mere fact of a guaranteed wage does not suffice; in addition, there must be, as there was in Belo and Halliburton, a condition of irregularity or instability of work, so that the guaranty yields the employees a stability of employment and income otherwise absent. The Su preme Court has not explicitly stated the needed quantum of irregularity, and we must ascertain it with the aid of such guides as the Court has implicitly provided. Since the Court has unequivocally said that Belo was correctly decided, we believe that, if the irregularity in any case is at least as great as in Belo, a fair guarantee will bring that case within the exception.
Whether this case is thus exceptional is a question of fact. In Belo, there was no finding by the district court of the fact of instability, nor did the Supreme Court state any of the details of the evidence pertinent thereto. We have examined the Belo record for such evidence and have set it forth in the Appendix to this opinion; that evidence consists solely of a sampling of time sheets. In the instant case, the trial judge did not discuss this question, nor did he make any finding which bears on it. All the evidence here of a kind similar to that in the Belo record we have also set forth in our Appendix. As that evidence is entirely documentary, no issue of witness' credibility arises; therefore, we can pass on the facts as well as could the trial judge, and need not remand for a finding by him. In comparing Belo and this case, we have taken as a yardstick the number of weeks during which the employees, in the respective cases, worked less hours than the statutory minimum (i. e., 44 in Belo and 40 here). On the basis of that comparison, we conclude that the irregularity here was somewhat greater than in Belo. Consequently, and because we consider the guarantee here fair in the circumstances, we hold that the contracts here meet the statutory requirement as construed by the Supreme Court. We may add that, in the record in this case, there is an exhibit showing that employees, under the plan, in 12 percent of the total weeks worked less than the scheduled (i. e., contract) hours; this, in and of itself, indicates considerable instability; but, as no such comparable total figures appear in the Belo record, we are unable to make a comparison in that respect between the two cases.
Plaintiff makes much of a sentence in the Asselta opinion (331 U.S. at pages 209, 210, 67 S.Ct. at page 1184), in which the Court said that the Belo-Halliburton exception does not apply unless there is "provision for a guaranteed weekly wage with a stipulation of an hourly rate which under the circumstances presented could properly be regarded as the actual regular rate of pay." We do not agree with plaintiff that this means that the hourly rate must be identical with the actual regular rate in accord with Missel, Asselta, Helmerich & Payne, and Youngerman-Reynolds. We think it means that, where there concur (a) enough irregularity and (b) a fair guarantee, then the contract rate is to be "regarded as" the equivalent of the actual rate, i. e., as a substitute therefor. Plaintiff also seeks to differentiate the instant case from Belo and Halliburton on the ground that the agreements there provided for overtime compensation at "not less than one-and-one-half times" the contractual hourly rates, while here that phrase is not in the contracts. We see nothing but a verbal difference, resulting in no practical, distinguishing consequences. In the case at bar, as in those two other cases, the employee is paid at the fixed overtime rate of 150% of the contract rate.
We do not agree with the district court that the plan is invalid as to those employees who had previously received hourly earnings greater than the hourly rates they received under the plan. In both Belo and Halliburton, the guarantee plans resulted in some such reductions.
To the extent that it held the plan partly invalid, the judgment is reversed; otherwise it is affirmed.
Appendix
1. Instability of employment in Belo Case and in the case at bar.
Belo casei
Total Weeks Worked
Weeks worked 44 hours or over
Weeks worked under 44 hours
Anderson 33 26 7
Bagwell 30 28 2
Bates 29 27 2
Batts 30 30 0
Brewer 28 24 4
Burleson 24 23 1
Cornkle 24 15 9
Crume 29 17 12
Eastus 44 37 7
Fair 34 34 0
Greeley 30 28 2
Lewis 29 19 10
Lockart 26 20 6
Lovell 31 IS 13
Martin 28 11 17
Mills 30 28 2
Moffet 30 28 2
Monroe 30 29 1
Montigue 28 25 3
Morrow 28 18 10
Newman 26 23 3
Prasifka 32 32 0
Simmons 18 18 0
Snodgrass 34 33 1
Vickers 30 16 14
West 30 22 8
Wilson 25 16 9
Walker 30 28 2
— — .—
Total 820 673 147
Percentage 100% 82% CO 3*
Utica Knitting Mills:
Total Weeks Weeks Weeks worked worked Worked 40 hours under or over 40 hours
Ahrens 25 20 5
Angelhow 30 23 7
Atkinson 20 16 4
Blackowiak 15 .14 1
Total Weeks Worked
Weeks worked 40 hours or over
Weeks worked under 40 horns
Bronk 31 26 5
Cipriano 21 19 2
Clark 22 19 3
Cunningham 24 22 2
Davies 20 19 1
Fanelli Z1 19 2
Giglio 16 15 1
Haight 19 18 1
Haven , 22 21 1
Heckert 20 20 0
Helliwell 19 17 2
Hess •29 23 6
Hitchcock 24 21 3
Jerzak 24 20 4
C. Julian 9 6 3
M. Julian 19 14 5
Keys 19 14 5
Laney 13 13 0
Lannuti 5 4 1
Leuthauser 10 5 5
McCann 33 24 . 9
.
Mabbett 33 24 9
Madrid 17 13 4
Monescalchi 22 21 1
Moorehead 15 14 1
Munson 10 10 0
Murdock 22 19 3
Noell 23 15 8
Payne 19 12 7
Petrie 79 67 12
Roberts 10 5 5
Salmon 11 10 • 1
Sanger 11 6 5
Scannel 38 27 . 11
Shelton . 23 11 12
Simpson 3 2 1
Sinsabaugh 8 3 5
Slater 24 14 10
Smith 11 8 3
Starr 19 17 2
Tison 14 7 7
Treannie 21 13 8
Turczen 4 4 0
Wallace 16 15 1
Wehnau 31 27 4
Williams • 8 2 6
Wirth 17 16 1
Total 1019 814 205
Percentage 100% 80% 20%
These tables have been prepared from the time sheets of the employees shown in the records of the two cases; while the time sheets of all employees for all the weeks worked are not in the record, the sampling is broad enough in each case to make possible a reasonably reliable estimate of the instability of employment.
The variation is noted below 44 hours in the Belo case, since at the time that case arose, the statutory work week was 44 hours. The variation is noted below 40 hours in the case at bar, since the statutory work week is now 40 hours.
2. Tabulation showing percentage ,of total weeks that employees on plan in the instant case have worked more or less thorn "scheduled" hours; there are no comparable figures in the Belo record.
Wks. on
Wks. worked less than scheduled hrs. Earnings controlled by guarantee
Wks. worked more than scheduled hrs. Earnings controlled by hourly rates
Wks. worked exactly scheduled hours
Employees Guarantee Number Percent Number Percent Number Percent
E. Angelhow 193 49 25.4% 142 73.6% 2 1%
W. Wallace 137 14 10.2% 94 68.6% 29 21.2%
G. Slater 193 33 17.1% 121 62.7% 39 20.2% '
A. Williams 226 62 27.4% 122 54. % 42 18.6%
J. Hess 226 13 5.8% 181 80. % 32 14.1%
C. Wehnau 226 22 9.7% 148 65.5% 56 24.8%
L. Bronk 226 25 11.1% 147 65. % 54 23.9%
F. Ahrens 226 21 9.3% 143 63.3% 62 27.4%
S. Keyes 226 15 6.6% 197 87.2% 14 6.2%
E. Davis 226 8 3.5% 201 88.9% 17 7.6%
A. Monescalchi 226 13 5.7% 192 85. % 21-9.2%
E. Heckert 199 8 4. % 137 68.8% 54 27.2%
J. Scannel 226 24 10.6% 98 43.4% 104 46. %
C. Munson 226 6 2.6% 213 94.2% 7 3.2%
E. Haven 185 32 17.3% 116 62.7% 37 20. %
J. Hitchcock 226 24 10.6% 155 68.6% 47 20.8%
M. Cunningham 226 11 4.9% 163 72.1% 52 23. %
E. Clarke 226 29 12.9% 131 58. % 66 29.2%
R. Murdock 226 31 13.7% 146 64.6% 49 21.7%
M. Haight 226 8 3.5% 201 88.9% 17 7.6%
A. Wirty 226 12 5.3% 18 8. % 196 86.7%
F. Giglio 226 10 ' 4.4% 82 36.3% 134 59.3%
S. Fanelli 226 5 2.2% 145 64.2% 76 33.6%
F. Moorehead 226 25 11.1% 127 56.2% 74 32.7%
E. Madrid 175 13 7.4% 1 00.6% 161 92. %
J. Blackowiak 226 2 0.9% 195 86.3% 29 12.8% '
T. Petrie 226 173 76.5% 43 19. % 10 4.5%
C. Smith 226 8 3.5% 196 86.7% 22 9.8%
F. McCann 226 36 15.9% 150 66.4% 40 17.7%
J. Jerzak 226 21 9.3% 151 66.8% 104 23.9%
R. Cipriano 173 19 11. % 61 35.3% 103 53.7%
W. Shelton 226 44 19.5% 141 62.4% 41 18.1%
L. Starr 226 41 18.1% 158 70. % 27 11.9%
0. Atkinson 171 33 19.3% 126 73.7% 12 7. %
A. Laney 108 51 47.4% 50 46.5% 7 6.1%
J. Tison 226 32 14.2% 179 79.2% 15 6.6%
Wks. on
Wks. worked less than scheduled hrs. Earnings controlled by guarantee
Wks. worked more than scheduled hrs. Earnings controlled by hourly rates
Wks. worked exactly scheduled hours
Employees Guarantee Number Percent Number Percent Number Percent
W. Sanger 226 21 9.3% 181 80.1% 24 10.6%
J. Leuthauser 226 21 9.3% 86 38.1% 119 52.6%
M. Julian 226 23 10.2% 82 36.3% 121 53.5%
J. Roberts 226 13 5.8% 187 82.7% 36 11.5%
T. Sinsabaugh 184 16 8.6% 69 37.5% 99 53.9%
C. Julian 198 18 9.1% 166 83.8% 14 7.1%
J. Treannie 162 14 8.6% 137 84.6% 11 6.8%
E. Race 19 1 5.3% 18 94.7% 0 0
J. Toczdlowski 23 2 8.7% 21 91.3% 0 0
J. T. Kane 148 8 5.4% 140 94.6% 0 0
E. Helliwell 202 13 6.4% 0 0% 189 93.6%
D. Braun 27 0 0% 27 100. % 0 0
J. Lanutti 137 4 2.9% 128 93.4% 5 3.7%
W. Schmutzler 79 9 11.4% 1 1.3% 69 87.3%
J. Payne 20 2 10. % 18 90. % 0 0
V. E. Payne 93 21 22.5% 67 72. % 5 5.4%
G. Salmon 30 7 23.3% 23 76.7% 0 0
Totals 9862 1166 6222 2474
Aggregate percentages (100%) 12% 63% 25%
These regulations, being a portion of Part 541 of the Regulations, read as follows:
The weekly salary, the scheduled number of hours, and the rates vary as to the several employees, but the writings in all other essential elements are similar.
This section, 29 U.S.C.A. § 207(a), reads: "No employer shall employ any of his employees for a work week longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed."
See Walling v. Uhlmann Grain Co., 7 Cir., 151 F.2d 381, 383; Walling v. Alaska Pacific Consolidated Mining Co., 9 Cir., 152 F.2d 812; Walling v. Richmond Screw Anchor Co., 2 Cir., 154 F.2d 780, 784, note 4, certiorari denied 328 U.S. 870, 66 S.Ct. 1383, 90 L.Ed. 1640; Walling v. Wall Wire Products Co., 6 Cir., 161 F.2d 470.
We "are merely a reflector, serving ac a judicial moon"; Choate v. Commissioner, 2 Cir., 129 F.2d 684, 686; Fleming v. Post, 2 Cir., 146 F.2d 441, 443, 158 A.L.R. 1384; Walling v. Richmond Screw Anchor Co., 2 Cir., 154 F.2d 780, 784, certiorari denied 328 U.S. 870, 66 S.Ct. 1383, 90 L.Ed. 1640; cf. Perkins v. Endicott Johnson Corp., 2 Cir., 128 F.2d 208, 218; Picard v. United Aircraft Corp., 2 Cir., 128 F.2d 632, 636; Zalkind v. Scheinman, 2 Cir., 139 F.2d 895, 903; 50 Yale Law J. (1941) 1448.
Plaintiff's criticism of the contracts here are virtually the same as thos® voiced in the Halliburton case in the Circuit Court by Judge Garrecht in his dissenting opinion, 9 Cir., 152 F.2d 622, 624.
There the Court said: "This policy is based upon a common sense recognition of the special problems confronting employer and employee in businesses where the work hours fluctuate from week to week and from day to day. Many such employees value the security of a regular weekly income. They want to operate on a family budget, to make commitments for payments on homes and automobiles and insurance. Congress has said nothing to prevent this desirable objective. This Court should not."
This is understandable, as the Supreme Court had not then reaffirmed Belo in Halliburton.
Kind v. Clark, 2 Cir., 161 F.2d 36, 46; Letcher County v. De Foe, 6 Cir., 151 F.2d 987, 990; Bowles v. Beatrice Creamery Co., 10 Cir., 146 F.2d 774, 780; J. S. Tyree, Chemist, Inc., v. Thymo Borine Laboratory Co., 7 Cir., 151 F.2d 621. 624: Equitable Life Assurance Society of United States v. Irelan, 9 Cir., 123 F.2d 462, 464.
That no more than 60 employees, out of a total varying from 2,200 to 3,000, ever came under the plan is a further fact (not alone conclusive) tending to show that the defendant did not use the guarantee as a subterfuge to avoid the Act.
These figures are set forth as point 2 of our Appendix.