Mitchell v. Brown

• Decision Date: 12 July 1955
• Docket Number: No. 15258.,15258.
• Citation: 224 F.2d 359
• Parties: James P. MITCHELL, Secretary of Labor, United States Department of Labor, Appellant, v. Kenneth R. BROWN, doing business as Brown Engineering Company, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

224 F.2d 359 (1955)

James P. MITCHELL, Secretary of Labor, United States Department of Labor, Appellant, v. Kenneth R. BROWN, doing business as Brown Engineering Company, Appellee.

No. 15258.

United States Court of Appeals Eighth Circuit.

July 12, 1955.

Sylvia S. Ellison, Atty., U. S. Department of Labor, Washington, D. C. (Stuart Rothman, Solicitor; Bessie Margolin, Asst. Sol.; Harry M. Leet, Atty., U. S. Department of Labor, and B. Harper Barnes, Regional Atty., Washington, D. C., were on the brief), for appellant.

Edgar Musgrave and Peter W. Janss, Des Moines, Iowa (Allen Whitfield and Gerald O. Patterson, Des Moines, Iowa, were with them on the brief), for appellee.

Before GARDNER, Chief Judge, and WOODROUGH and VOGEL, Circuit Judges.

WOODROUGH, Circuit Judge.

The Secretary of Labor brought this action to enjoin defendant Kenneth R. Brown, doing business as Brown Engineering Company, from violating Sections 15(a) (1) and 15(a) (2) of the Fair Labor Standards Act of 1938, as amended by the Fair Labor Standards Amendments of 1949, 29 U.S.C.A. § 201 et seq.¹ The District Court had jurisdiction of the action by virtue of Section 17 of the Act, 29 U.S.C.A. § 217. Plaintiff's complaint alleged that defendant had been and was continuing to violate the provisions of the Fair Labor Standards Act by "employing many of his employees in interstate commerce or in the production of goods for interstate commerce", for workweeks longer than forty hours without paying time-and-a-half overtime compensation for such work in excess of forty hours. The case was tried to the court sitting without a jury and all facts were stipulated before trial. The trial court adopted the stipulation as its findings of fact and issued a memorandum opinion incorporating therein its conclusions of law. Judgment was entered dismissing the complaint and plaintiff appeals.

The stipulation of facts shows that defendant is a professional or consulting engineer employing approximately 43 persons at his place of business in Des Moines, Iowa. His work, and that of his associates, consists of consultations with clients respecting engineering and architectural problems and the giving of advice and recommendations for the solution thereof. After such consultations an engineering contract is entered into if the client determines to proceed with the proposed construction project. This contract consists essentially of two divisions or services to be performed by defendant.

The first part of the contract defines defendant's duties prior to the beginning of actual construction. Defendant agrees to make initial surveys and introductory investigations to produce the preliminary design of the construction contemplated; to thereafter prepare plans, specifications, drawings, designs and tabulations reflecting in detail the construction work to be performed; and to prepare estimate of cost, form of notice and bidding proposal, and form of contract between the client and the contractor. The client usually obtains bids on the proposed construction work but occasionally defendant sends the plans and specifications directly to the prospective bidders. The plans and specifications at all times remain the property of the defendant and a deposit is required from prospective bidders to insure their return. Where competitive bids are taken defendant is usually in attendance at the letting, examines such bids, consults with his client and recommends the bids to be accepted. The client decides to whom the contract shall be awarded.

The second part of the engineering contract relates to defendant's duties after the construction work is awarded to a contractor. Defendant agrees to furnish inspection service during the period of construction. The employee assigned by defendant to perform this inspection service is called a "resident engineer". His duties consist of inspecting all materials as they arrive at the job site to determine if they meet the specifications previously agreed to; inspecting the construction work to determine if the contractor is proceeding according to the plans and specifications; and making periodic estimates of the progress of construction, computing the percentage of moneys then earned by the contractor, and reporting such computations to the owner with recommendation for payment thereof if the work completed is in accordance with the plans and specifications. Inspection service varies on different construction projects, sometimes being relatively constant while at other times only weekly or periodic inspections are required. Defendant and his employees do not engage in the actual construction work on a project and do not have the right or duty to direct or control the work of the contractor, except to the extent of making reports and recommendations on the work performed.

Defendant's fee for services rendered under the engineering contract is in virtually all instances based upon a percentage of the estimated cost of the project as determined by the plans, specifications and estimate of cost. The fee for inspection service under the second part of the contract is usually equal to one-half the amount charged for the preparation of plans and specifications under the first division of the contract.

The plans and specifications prepared by defendant and his employees are sometimes sent outside of Iowa to prospective bidders in other states, and occasionally the plans and specifications call for materials, parts, machinery, etc., which must be fabricated to order by factories and plants located outside of the state. Also, engineering contracts entered into between defendant and Rural Electric Cooperatives required that defendant submit his plans and specifications to the Administrator of the Rural Electrification Administration at Washington, D. C., for approval.

During the period from 1950 to 1953 the stipulation showed that defendant and his employees participated, to the extent and according to the terms of the above described engineering contracts, in construction projects, all located within the State of Iowa, which may be considered in two groups: (1) Those involving instrumentalities of commerce, and (2) those involving the production of goods for commerce.

(1). Instrumentalities of commerce.

(a). Preparation of plans and specifications for the paving of approximately 37 sections of existing streets in four Iowa towns. Interstate commerce moved over all of these streets both before and after paving.

(b). Preparation of plans and specifications for enlarging the power plant and for making other additions to existing equipment of an interurban railroad. Approximately 25% of the power produced by the railroad is used in the operation of its railway. A substantial portion of the freight hauled by the railroad is moving in interstate commerce.

(2). Production of goods for commerce.

(a). Preparation of plans and specifications for the installation of additional equipment in the municipal power plant of the city of Pella, Iowa. The power plant supplies electricity to various enterprises which ship a substantial portion of their products outside of the state.

(b). Preparation of plans and specifications for new headquarters buildings for three rural electrification cooperatives which distribute electrical energy to railroads hauling interstate freight and passengers; to factories producing goods for interstate commerce; to telephone networks and radio stations for interstate messages and programs; and to a state highway patrol for communications controlling interstate traffic.

The contracts for the paving of the streets and for the alteration and improvement of the Pella, Iowa, power plant all provided that the decision of the engineer as to the meaning of the plans and specifications, and as to whether the work was in accordance therewith, was final.

It was further stipulated that if defendant's employees come within the coverage of the Fair Labor Standards Act, the overtime provisions of said Act have been violated.

Upon the facts so stipulated the trial court was of the opinion that defendant's employees were neither engaged in commerce nor in the production of goods for commerce, as those terms are used and defined in the Fair Labor Standards Act. It concluded that: "The effect of defendant's activities and those of his employees in commerce is too far removed from his main activities to have more than a remotely incidental effect."

Since the enactment of the Fair Labor Standards Act in 1938 the courts have been constantly called upon to determine whether a particular employee or group of employees in engaged "in commerce" or in the "production of goods for commerce". The difficulty has been in finding an acceptable standard for ascertaining whether an employee's activities bring him within the coverage of the Act. The Supreme Court recognized this difficulty in A. B. Kirschbaum Co. v. Walling, 316 U.S. 517, 520, 62 S.Ct. 1116, 1118, 86 L.Ed. 1638, when it said: "To search for a dependable touchstone by which to determine whether employees are `engaged in commerce or in the production of goods for commerce' is as rewarding as an attempt to square the circle." In the final analysis, of course, each case must stand or fall on its own particular facts. In the course of reviewing decisions of lower courts in cases arising under the Act, the Supreme Court has announced several broad, guiding principles to be applied in determining coverage. These were reiterated in the very recent case of Mitchell v. C. W. Vollmer & Company, 75 S. Ct. 860, 862, thus:

"We are dealing with a different Act of another vintage i. e., the Fair Labor Standards Act rather than the Federal Employees Liability Act — one that has been given a liberal construction from A. B. Kirschbaum Co. v. Walling, 316 U.S. 517, 62 S.Ct. 1116, 86 L.Ed. 1638, to Alstate Construction Co. v. Durkin, 345 U.S. 13, 73 S.Ct. 565, 97 L.Ed. 745. The question whether an employee is

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