366 U.S. 28 (1961), 274, Goldberg v. Whitaker House Cooperative, Inc.

Docket Nº:No. 274
Citation:366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100
Party Name:Goldberg v. Whitaker House Cooperative, Inc.
Case Date:April 24, 1961
Court:United States Supreme Court
 
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366 U.S. 28 (1961)

81 S.Ct. 933, 6 L.Ed.2d 100

Goldberg

v.

Whitaker House Cooperative, Inc.

No. 274

United States Supreme Court

April 24, 1961

Argued March 30, 1961

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT

Syllabus

Respondent is a cooperative incorporated to manufacture, sell and deal in knitted, crocheted and embroidered goods. Its members make such goods in their homes and deliver them to the cooperative, which pays them periodically "an advance allowance" pending sale of the goods and distribution of any net proceeds to the members. The members manufacture what the cooperative desires, receive the compensation it dictates, and may be expelled from membership for substandard work or failure to obey the cooperative's regulations.

Held: the cooperative is an "employer" and its members are "employees" within the meaning of § 3 of the Fair Labor Standards Act of 1938, as amended, and the cooperative is subject to the minimum wage and recordkeeping provisions of the Act and the regulations prescribed by the Administrator under §11(d) "to prevent the circumvention or evasion of and to safeguard the minimum wage rate" prescribed by the Act. Pp. 28-33.

275 F.2d 362 reversed.

DOUGLAS, J., lead opinion

MR. JUSTICE DOUGLAS delivered the opinion of the Court.

Respondent cooperative was organized in 1957 under the laws of Maine; and we assume it was legally organized. The question is whether it is an "employer" and its members are "employees" within the meaning of the Fair Labor Standards Act of 1938, § 3, 52 Stat. 1060, as

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amended, 29 U.S.C. § 203. The question is raised by a suit filed under § 17 of the Act by petitioner to enjoin respondent from violating the provisions of the Act concerning minimum wages (§ 6), recordkeeping (§ 11(c)) and the regulation of industrial homework (§ 11(d)). And see § 15(a)(5). The District Court denied relief. 170 F.Supp. 743. The Court of Appeals affirmed by a divided vote. 275 F.2d 362. The case is here on a petition for certiorari which we granted (364 U.S. 861) because of the importance of the problem in the administration of the Act.

The corporate purpose of the respondent, as stated in its articles, is to manufacture, sell, and deal in "knitted, crocheted, and embroidered goods of all kinds." It has a general manager and a few employees who engage in finishing work, i.e., trimming and packaging. There are some 200 members who work in their homes. A homeworker who desires to become a member buys from respondent a sample of the work she is supposed to do, copies the sample, and submits it to respondent. If the work is found to be satisfactory, the applicant can become a member by paying $3 and agreeing to the provisions of the articles and bylaws. Members were prohibited from furnishing others with articles of the kind dealt in by respondent.1 They are required to remain members at least a year. They may, however, be expelled at any time [81 S.Ct. 935] by the board of directors if they violate any rules or regulations or if their work is substandard.2 Members are not liable for respondent's debts; they may not be

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assessed; each has one vote; their certificates are not transferrable; each member can own only one membership; no dividends or interest is payable on the certificate "except in the manner and limited amount" provided in the bylaws. The bylaws provide that "excess receipts" are to be applied (1) to writing off "preliminary expenses"; (2) to "necessary depreciation reserves"; (3) to the establishment of a "capital reserve." The balance may be used in the discretion of the board of directors "for patronage refunds which shall be distributed according to the percentage of work submitted to the Cooperative for sale." Members are paid every month or every other month for work submitted for sale on a rate-per-dozen basis. This payment is considered to be "an advance allowance" until there is a distribution of "excess receipts" to the members "on the basis of the amount of goods which each member has submitted to [respondent] for sale."

By § 11(d) of the Act, the Administrator is authorized to make

such regulations and orders regulating, restricting, or prohibiting industrial homework as are necessary or appropriate to prevent the circumvention or evasion of and to safeguard the minimum wage rate prescribed in this Act.

Section 11(d) was added in 1949,3 and provides that "all existing regulations or orders of the Administrator relating to industrial homework are hereby continued in full force and effect."

These Regulations4 provide that no industrial homework, such as respondent's members do, shall be done "in or about a home, apartment, tenement, or room in a residential establishment unless a special homework certificate"5 has been issued. Respondent's members have no

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such certificates; and the question for us is whether its operations are lawful without them and without compliance by respondent with the other provisions of the Act.

These Regulations have a long history. In 1939, shortly after the Act was passed, bills were introduced in the House to permit homeworkers to be employed at rates lower than the statutory minimum.6 These amendments were rejected.7 Thereupon, the Administrator issued regulations governing homeworkers;8 and we sustained some of them in Gemsco, Inc. v. Walling, 324 U.S. 244, decided in 1945. In 1949 the House adopted an amendment which would have exempted from the Act a large group of homeworkers.9 The Senate bill contained no such exemption; and the Conference Report rejected the exemption.10 Instead, § 11(d) was added, strengthening the authority of the Administrator to restrict or prohibit homework.11 Still later, respondent was organized, and, as we have said, it made no attempt to comply with these homework regulations.

[81 S.Ct. 936] We think we would be remiss, in light of this history, if we construed the Act loosely so as to permit this homework to be done in ways not permissible under the Regulations. By § 3(d) of the Act, an "employer" is any person acting "in the interest of an employer in relation to an employee." By § 3(e), an "employee" is one "employed" by an employer. By § 3(g), the term employ

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"includes to suffer or permit to work." We conclude that the members of this cooperative are employees within the meaning of the Act.

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