405 F.2d 668 (5th Cir. 1968), 25462, Wirtz v. Lone Star Steel Co.

Docket Nº:25462.
Citation:405 F.2d 668
Party Name:W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Appellant, v. LONE STAR STEEL COMPANY, Appellee.
Case Date:December 12, 1968
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 668

405 F.2d 668 (5th Cir. 1968)

W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Appellant,



No. 25462.

United States Court of Appeals, Fifth Circuit.

December 12, 1968

Page 669

Bessie Margolin, Assoc. Sol., Robert E. Nagle, Atty., Dept. of Labor, Charles Donahue, Sol. of Labor, Donald S. Shire, Atty., Dept. of Labor, Washington, D.C., Major J. Parmenter, Regional Atty., for appellant.

Robert E. Burns, Burford, Ryburn & Ford, Dallas, Tex., Albert Tarbutton, Jr., Lone Star, Tex., for appellee.

Before RIVES and DYER, Circuit Judges, and MEHRTENS, District Judge.

MEHRTENS, District Judge:

W. Willard Wirtz, Secretary of Labor, appeals from a judgment in favor of Lone Star Steel Company and taxing costs against him. Three questions are presented on this appeal: (1) Is Lone Star an employer of individuals who work for contract haulers within the meaning of the Fair Labor Standards Act?; (2) Is Lone Star violating the 'hot cargo' provisions of Section 15(a) (1) of the Act?; and (3) Was assessment of costs against the Secretary proper? The District Judge answered 'No' to the first two questions and 'Yes' to the third question. We affirm as to the first question and reverse as to the second and third questions.

Employer-Employee Relationship

Whether a person or corporation is an employer or joint employer is essentially a question of fact. Boire v. Greyhound Corporation, 376 U.S. 473, 84 S.Ct. 894, 11 L.Ed.2d 849. Each case must be considered in light of the total situation or whole activity to determine whether an employer-employee relationship exists. The label 'independent contractor' will not take the worker from the Act's protection if the work done in its essence follows the usual path of an employee. Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772. In considering whether a person or corporation is an 'employer' or 'joint employer', the total employment situation should be considered with particular regard to the following questions: (1) Whether or not the employment takes place on the premises of the company?; (2) How much control does the company exert over the employees?; (3) Does the company have the power to fire, hire, or modify the employment condition of the employees?; employment condition of the employees?;

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(4) Do the employees perform a 'specialty job' within the production line?; and (5) May the employee refuse to work for the company or work for others?

The trial court in a detailed opinion found that Lone Star Steel Company was and is not an employer of the employees who work for the contractors and has not violated the provisions of Section 15(a)(2) or 15(a)(5) of the Act. The trial court's findings are attached hereto as an appendix. Being a question of fact, the Secretary would have to demonstrate that the findings below were clearly erroneous. Rule 52(a), F.R.Civ.P. We are unable to say that these findings are clearly erroneous. To the contrary, we conclude that the trial court's findings of fact on this question are amply supported by the evidence.

Violation of 'Hot Goods' Section

The trial court concluded that Lone Star Steel Company had not violated the provisions of Section 15(a)(1) of the Act upon the above findings and additional findings that the contract between the company and the contractors provided for the contractors' compliance with the relevant portions of the Act and written certification of compliance, and that the company made payments to the contractors in good faith relying upon these written assurances. While it is true that such written assurances were given, the record shows that in 1956 the United States Department of Labor conducted an investigation of the wages paid to the contractors' employees and thereafter filed actions alleging Wage and Hour violations by the contractors but not by the company. Lone Star Steel Company was notified of the investigation and was aware of the filing of such actions.

The person who had sole responsibility for keeping Lone Star Steel Company in compliance with the Act also had hearsay evidence that the 'hot goods' section was being violated. This same person had been present when certain contractors of Lone Star had been tried and found to be in violation of the Act. Further, a foreman of Lone Star Steel Company also had hearsay evidence that the contract haulers were being paid by the load. 'Good faith' under the Act does not include ignoring the obvious. Lone Star Steel Company had the contractual right to inspect the records of the contractors at any time. A good faith effort to comply with the Act would have included checking their records and any further investigation necessary to ascertain the facts. A person or a corporation cannot take an 'ostrich-like attitude' and still be in good faith under the Fair Labor Standards Act. Mitchell v. Hausman, 5 Cir. 1958, 261 F.2d 778. Since the contractors violated the minimum wage provisions of the Act and Lone Star Steel Company could and should have known of such violation, Lone Star Steel Company is in violation of the 'hot goods' section of the Act. We, therefore, reverse the lower court on this question without deciding the propriety of injunctive relief. We note in passing that the contractor had been in compliance with the Act for almost eighteen months prior to trial and so far as we are aware has continued to pay the drivers as required by law. On the record before us there is nothing to indicate that the...

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