Court Opinion

ID: 9419265
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:48:12.482327+00
Date Added: 2024-06-11T17:22:16.936885
License: Public Domain

Mr. Justice Reed,
dissenting:
The Court holds, “When employer and employees have agreed upon an arrangement which has proven mutually satisfactory, we should not upset it and approve an inflexible and artificial interpretation of the Act which finds no support in its text and which as a practical matter eliminates the possibility of steady income to employees with irregular hours.” Yet it is recognized by the Court that the validity of the contract “turns upon the meaning of the words The regular rate at which he is employed,’ ” the phrase left undefined by Congress, which it is said the courts also should leave undefined and flexible. Not only does the Court’s conclusion assume that the typical Belo contract conforms to the Fair Labor Standards Act by the provision for hourly wages and time and a half for over*636time, but, in the opinion just announced, the Court approves this type contract for hiring, “so long as the new rate equals or exceeds the minimum required by the Act.” In so deciding, the Court gives the phrase “regular rate” an interpretation as inflexible and artificial as that which it condemns.
The Court’s interpretation that, in the absence of bad faith, any form of contract which assures the payment of the minimum wage and the required overtime complies with the Act may be assumed to be correct. But since the overtime hours must be compensated “at a rate not less than one and one-half times the regular rate at which he is employed,” § 7 (a) (3), the regular rate cannot be left without “definition,” “flexible” or unfound for this case. And once so found, it must be applied to the circumstances of this litigation. No all-inclusive definition will be attempted. The possibilities of variation in contracts are too great. Certainly, however, the Court does not mean to say that the employer and employee may capriciously select a certain figure, unrelated to the wages paid, and say “That is the regular rate of employment.” Every contract of employment is assumed, by the statute, to contain a “regular rate,” and for each contract it is a legal, not a factual, conclusion. What that rate is here is the object of our inquiry. Once determined for this case, that conclusion becomes a precedent for other similar contracts and so, in one sense, whether we wish it or not, a definition to be applied in the administration of the Act.
This Court accepts the view that the Fair Labor Standards Act was intended not only to put a floor under wages but also a ceiling over hours. The limitation of hours in turn had two purposes—the spreading of work and extra compensation for overtime, no matter how high the regular wage may be. Overnight Motor Transportation Co. v. Missel, ante, pp. 572, 577. Since overtime pay must at least equal time and a half the regular rate, as § 7 (a) *637specifies, employers and employees may not be permitted to contract in avoidance of the statutory requirement. Contracts for a regular rate per hour conform easily to the requirements, but contracts for compensation in other forms compel an analysis of their terms to find the regular rate. Fixed salaries, as this Court agrees today in Missel’s case, are to be reduced to hourly rates on the basis of a week as the unit of time. Belo’s contract contains elements both of hourly wage and fixed weekly wage contracts. We come then to this point. Are the contracts here involved for weekly wages with variable hours, or for hourly rates with time and a half of such rates for overtime? If the latter, respondent contends the Act has left him free to contract with his employees at such hourly regular rates as may be agreed upon, limited only by the minimum wage requirements. As a court, we must appraise the nature of these contracts and, in my judgment, they are agreements for weekly wages for variable hours, with a provision for additional compensation per hour contingent upon work in excess of an ascertainable number of hours—the number of hours of work required for the wages earned under the hourly wage terms of the contract to equal the guaranty.1 Until these hours are exceeded, the stipulated wage per hour has no demonstrable effect.
The contracts stated they were drawn to comply with the “scheme of the Act without reducing” weekly wages. The hourly rate was customarily written as one-sixtieth of the weekly wages. The overtime above the maximum hours was set at 150% of the hourly wage or one-fortieth of the weekly. This was then followed by a guaranty that the employee should “receive weekly,” for regular and overtime, the former weekly wage. This guaranty was the dominating feature of the contract. Without the guaranty, the adoption of a low hourly rate would encounter *638the full weight of employee bargaining power. The guaranty avoids this conflict by fixing the minimum weekly wage. This guaranty controls the weekly wage up to 54% hours of work, the number of hours contracted for by Belo without paying more than the fixed weekly wage. In a 54% hour week or less, the regular rate should be the guaranty divided by the hours actually worked.
It seems obvious that the guaranty was the heart of the arrangement. The effect of the contract in the illustrative case is to pay 73 cents an hour for work up to 54% hours and $1.00 (expressed in the circumlocution of time and a half 67 cents) for overtime beyond those hours, with a guaranty that there will be $40 worth of work each week. The “basic” hourly rate, the hours contracted for at the basic rate and the stated percentage paid for overtime may be varied without effect on earnings provided the guaranty and real overtime rate are kept fixed.2
The employee willing, the number of hours which must be worked to earn the guaranty can be increased by suitable adjustment of the contract figures of hourly rate, hours contracted and overtime percentages. By such a *639verbal device, astute management may avoid many of the disadvantages of ordinary overtime, chief of which is a definite increase in the cost of labor as soon as the hours worked exceed the statutory workweek. If the intention of Congress is to require at least time and a half for overtime work beyond a fixed maximum number of hours (40, 42 or 44 hours), that intention is frustrated by today’s holding. Under Missel’s case, an employer who engages a worker for a fixed weekly wage of $40 for irregular hours and works him 54% hours a week in a year with a 44 hour maximum, owes $43.86. Under the Belo contract, the worker would receive $40. Because there is no increase of labor cost between the statutory maximum and the hours contracted for (54%), the employer has a financial inducement to require hours beyond the statutory maximum.
As pointed out above, this contract is not only an agreement to pay a fixed wage, $40.00, for variable hours up to 54%, but there is a provision for additional compensation for the hours over the contract maximum. Where the hours worked exceed the number necessary to entitle the employee to hourly pay under the contract, equal in the aggregate to the guaranty, the employee is entitled to receive his regular rate for the statutory maximum hours and 150% of that rate for all overtime. The contracts in most instances fixed the basic rate at one-sixtieth of the guaranty, but the effect of the guaranty, in our view, is to make the regular rate of employment for the precise number of hours necessary under the contract to earn the guaranty, the quotient of the guaranty divided by the hours.3 For *640the surplus hours over 54% the same regular rate continues to be applicable.* *4
It is the guaranty which gives character to these contracts, which determines the amount to be received by the employee under its terms, except in the instances of work beyond 54% hours. It is only work beyond the 54% hours which calls for extra pay from the employer. Consequently it seems proper to find the regular rate of employment by using the guarantee as the dividend and the maximum hours possible without increased contract pay as the divisor. The objection that this permits statutory overtime pay to be computed on contract overtime pay springs from the wording of the contract making the guarantee cover overtime up to the 54% hours. This objection loses its force with the determination that the guaranty fixes the quality of the contract, rather than the so-called basic or hourly rate of pay.
The judgment of the Circuit Court of Appeals should be reversed and this action remanded to the District Court for further proceedings.
Mr. Justice Black, Mr. Justice Douglas and Mr. Justice Murphy join in this dissent.

 Cf. Carleton Screw Products Co. v. Fleming, 126 F. 2d 537.

 An example will illustrate the lack of significance of the other numbers in the contract. Varying rates, hours and overtime percentages are substituted for those in the Belo contract quoted in the Court’s opinion. “In order to conform our employment arrangements to the scheme of the Act without reducing the amount of money which you receive each week, we advise that from and after October 24, 1938, your basic rate of pay will be [50] cents per hour for the first [29] hours each week, and that for time over [29] hours each week you will receive for each hour of work not less than [double] time such basic rate above mentioned, with a guaranty on our part that you shall receive weekly, for regular time and for such overtime as the necessities of the business may demand, a sum not less than $40.00.”
29 hoursX$.50=$14.50. 54.5 hours—29 hours=25.5 hours at $1.00 per hour=$25.50. Time plus overtime=$40.00. Thereafter the employee receives $1.00 per hour.
The same is true of a basic rate of $.60 for 36% hours and time and two-thirds thereafter, with a guaranty of $40.

 Weekly guaranty—$40. Hours worked—54%. Straight hourly contract wage—$40-H>0==:$.66%. Straight contract hours—44. 44X$.66%=$29.33%. Overtime hourly contract wage—$1.00. Overtime contract hours—10%. 10%X$1=$10.66%. Total contract wage paid—$40. Statutory regular rate—40-H54%=$.732 per hour. Statutory maximum hours—44. 44X$,732=$32.20. Statutory overtime *640rate—$1,098. Statutory overtime hours=10%. 10%X$1.098=$11.71. Total required compensation—$43.91.

 Hours worked—60. Statutory maximum hours—44. Regular rate—$.732. 44X$.732=:$32.20. Statutory overtime hours—16. Overtime rate—$1,098. 16X$1.098=$17.57. Total required compensation—$49.77.