Goldberg v. Whitaker House Cooperative, Inc, 274

Citation81 S.Ct. 933,6 L.Ed.2d 100,366 U.S. 28
Decision Date24 April 1961
Docket NumberNo. 274,274
PartiesArthur J. GOLDBERG, Secretary of Labor, Petitioner, v. WHITAKER HOUSE COOPERATIVE, INC., et al
CourtU.S. Supreme Court

Miss Bessie Margolin, Washington, D.C., for petitioner.

Mr. Philip S. Bird, Waterville, Me., for respondents.

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 amended, 29 U.S.C. § 203, 29 U.S.C.A. § 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), record-keeping (§ 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 grnated (364 U.S. 861, 81 S.Ct. 104, 5 L.Ed.2d 85) 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 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 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 19493 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 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, 65 S.Ct. 605, 89 L.Ed. 921, 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.

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

There is no reason in logic why these members may not be employees. There is nothing inherently inconsistent between the coexistence of a proprietary and an employment relationship. If members of a trade union bought stock in their corporate employer, they would not cease to be employees within the conception of this Act. For the corporation would 'suffer or permit' them to work whether or not they owned one share of stock or none or many. We fail to see why a member of a cooperative may not also be an employee of the cooperative. In this case the members seem to us to be both 'members' and 'employees.' It is the cooperative that is affording them 'the opportunity to work, and paying them for it,' to use the words of Judge Aldrich, dissenting below. 275 F.2d at page 366. However immediate or remote their right to 'excess receipts' may be, 12 they work in the same way as they would if they had an individual proprietor as their employer.13 The members are not self-employed; nor are they independent, selling their products on the market for whatever price they can command. They are regimented under one organization, manufacturing what the organization desires and receiving the compensation the organization dictates.14 Apart from formal differences they are engaged in the same work they would be doing whatever the outlet for their products. The management fixes the piece rates at which they work; the management can expel them for substandard work or for failure to obey the regulations. The management, in other words, can hire or fire the homeworkers. Apart from the other considerations we have mentioned, these powers make the device of the cooperative too transparent to survive the statutory definition of 'employ' and the Regulations governing homework. In short, if the 'economic reality' rather than 'technical concepts' is to be the test of employment (United States v. Silk, 331 U.S. 704, 713, 67 S.Ct. 1463, 1468, 91 L.Ed. 1757; Rutherford Food Corp. v. McComb, 331 U.S. 722, 729, 67 S.Ct. 1473, 1476, 91 L.Ed. 1772), these homeworkers are employees.

Reversed.

Mr. Justice WHITTAKER, with whom Mr. Justice BRENNAN and Mr. Justice STEWART join, dissenting.

It is clear and undisputed that the Fair Labor Standards Act does not apply in the absence of an employer-employee relationship. Here, upon what seems to me to be ample evidence, the District Court found that the cooperative was created and is being operated as a true cooperative under the laws of Maine, 170 F.Supp. 743, and, on appeal, the Court of Appeals approved those findings. 1 Cir., 275 F.2d 362. Unless those findings are clearly erroneous, they must be accepted here. Fed.Rules Civ.Proc., 52(a), 28 U.S.C., 28 U.S.C.A. Accepting them excludes any notion that the cooperative was formed or availed of as a 'device' to circumvent the Act. It is not seriously contended here that these findings of the two courts below were 'clearly erroneous,' but rather the Government's principal contention is that the bona fides of the cooperative are immaterial.

Doubtless, even a true cooperative may have employees. But surely a...

To continue reading

Request your trial
649 cases
  • Lasater v. DirecTV, LLC
    • United States
    • U.S. District Court — Central District of California
    • 2 Noviembre 2017
    ...is a question of law whereby "[t]he touchstone is 'economic reality.' " Id. (quoting Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 33, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961) ).There are three situations in which a Court may find that a joint employment relationship exists:(1) Where......
  • Hess v. Suzuki, 1:10-cv-01821-AWI-BAM
    • United States
    • U.S. District Court — Eastern District of California
    • 14 Septiembre 2012
    ..."The touchstone is the 'economic reality' of the relationship," Boucher, supra, at p. 1091 (quotingGoldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961)): "Economic realities, not contractual labels, determine employment status for the remedial purposes......
  • Dynamex Operations W., Inc. v. Superior Court of L. A. Cnty.
    • United States
    • California Supreme Court
    • 30 Abril 2018
    ...business for himself or herself (and may properly be considered an excluded independent contractor). (See, e.g., Whitaker House Co-op , supra , 366 U.S. 28, 33, 81 S.Ct. 933 ; Alamo Foundation , supra , 471 U.S. 290, 301, 105 S.Ct. 1953.) In applying the economic reality test, federal court......
  • Chao v. Westside Drywall Inc
    • United States
    • U.S. District Court — District of Oregon
    • 13 Mayo 2010
    ...citations omitted)). “The touchstone is the ‘economic reality’ of the relationship.” Id. (citing Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961)). Courts have generally undertaken the economic reality analysis in one of two contexts: disputes over......
  • Request a trial to view additional results
2 firm's commentaries
9 books & journal articles
  • Employment relationship defined
    • United States
    • James Publishing Practical Law Books Texas Employment Law. Volume 1 Part I. The employment relationship
    • 5 Mayo 2018
    ...of Labor , 471 U.S. 290, 301 (1985) (the test of employment under the FLSA is economic reality); Goldberg v. Whitaker House Coop, Inc. , 366 U.S. 28, 33 (1961) (the economic realities of the worker’s relationship with the employer are the test of employment); 29 C.F.R. 500.20(h)(5)(iii). Th......
  • Wages, Hours, and Overtime
    • United States
    • James Publishing Practical Law Books Archive Texas Employment Law. Volume 1 - 2017 Part III. Employee compensation, safety and benefits
    • 9 Agosto 2017
    ...broad scope. The Supreme Court has noted this broad scope on at least two occasions. In Goldberg v. Whitaker House Cooperative , Inc. , 366 U.S. 28, 33 (1961), the Court concluded that the FLSA’s concept of employment is not limited by common law definitions or contractual designations. In ......
  • Wages, hours, and overtime
    • United States
    • James Publishing Practical Law Books Texas Employment Law. Volume 1 Part III. Employee compensation, safety and benefits
    • 5 Mayo 2018
    ...broad scope. The Supreme Court has noted this broad scope on at least two occasions. In Goldberg v. Whitaker House Cooperative , Inc. , 366 U.S. 28, 33 (1961), the Court concluded that the FLSA’s concept of employment is not limited by common law definitions or contractual designations. In ......
  • Employment Relationship Defined
    • United States
    • James Publishing Practical Law Books Archive Texas Employment Law. Volume 1 - 2017 Part I. The employment relationship
    • 9 Agosto 2017
    ...of Labor , 471 U.S. 290, 301 (1985) (the test of employment under the FLSA is economic reality); Goldberg v. Whitaker House Coop, Inc. , 366 U.S. 28, 33 (1961) (the economic realities of the worker’s relationship with the employer are the test of employment); 29 C.F.R. 500.20(h)(5)(iii). Th......
  • Request a trial to view additional results
3 provisions
  • 29 C.F.R. § 779.19 Employer, Employee, and Employ
    • United States
    • Code of Federal Regulations 2023 Edition Title 29. Labor Subtitle B. Regulations Relating to Labor Chapter V. Wage and Hour Division, Department of Labor Subchapter B. Statements of General Policy Or Interpretation Not Directly Related to Regulations Part 779. The Fair Labor Standards Act As Applied to Retailers of Goods Or Services Subpart A. General Some Basic Definitions
    • 1 Enero 2023
    ...rather than "technical concepts" determines whether there is employment subject to its terms ( Goldberg v. Whitaker House Cooperative,366 U.S. 28; United States v. Silk,331 U.S. 704; Rutherford Food Corp. v. McComb,331 U.S. 722 ). An "employer", as defined in section 3(d) of the Act, "inclu......
  • 29 C.F.R. § 784.8 "Employer," "Employee," and "Employ."
    • United States
    • Code of Federal Regulations 2023 Edition Title 29. Labor Subtitle B. Regulations Relating to Labor Chapter V. Wage and Hour Division, Department of Labor Subchapter B. Statements of General Policy Or Interpretation Not Directly Related to Regulations Part 784. Provisions of the Fair Labor Standards Act Applicable to Fishing and Operations On Aquatic Products Subpart A. General Some Basic Definitions
    • 1 Enero 2023
    ...rather than "technical concepts" determines whether there is employment subject to its terms ( Goldberg v. Whitaker House Cooperative,366 U.S. 28; United States v. Silk,331 U.S. 704; Rutherford Food Corp. v. McComb,331 U.S. 722 ). An "employer," as defined in section 3(d) of the Act, "inclu......
  • 29 C.F.R. § 783.7 "Employer", "Employee", and "Employ"
    • United States
    • Code of Federal Regulations 2023 Edition Title 29. Labor Subtitle B. Regulations Relating to Labor Chapter V. Wage and Hour Division, Department of Labor Subchapter B. Statements of General Policy Or Interpretation Not Directly Related to Regulations Part 783. Application of the Fair Labor Standards Act to Employees Employed As Seamen Some Basic Definitions
    • 1 Enero 2023
    ...rather than "technical concepts" determines whether there is employment subject to its terms ( Goldberg v. Whitaker House Cooperative,366 U.S. 28; United States v. Silk,331 U.S. 704; Rutherford Food Corp. v. McComb,331 U.S. 772 ). An "employer", as defined in section 3(d) of the Act, "inclu......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT