Seneca Coal & Coke Co. v. Lofton

• Decision Date: 08 July 1943
• Docket Number: No. 2642.,2642.
• Citation: 136 F.2d 359
• Parties: SENECA COAL & COKE CO. v. LOFTON.
• Court: U.S. Court of Appeals — Tenth Circuit

136 F.2d 359 (1943)

SENECA COAL & COKE CO. v. LOFTON.

No. 2642.

Circuit Court of Appeals, Tenth Circuit.

May 27, 1943.

Rehearing Denied July 8, 1943.

Hunter L. Johnson, of Tulsa, Okl., and Karl H. Mueller, of Ft. Worth, Tex., for appellant.

W. L. Shirey, of Tulsa, Okl. (Ned Warren, of Tulsa, Okl., on the brief), for appellee.

Before PHILLIPS, HUXMAN, and MURRAH, Circuit Judges.

MURRAH, Circuit Judge.

The appellee sought and obtained a judgment against his former employer for overtime compensation, liquidated damages, and attorney's fee under the provisions of the Fair Labor Standards Act of 1938. 52 Stat. 1060-1069, 29 U.S.C.A. 201-219. The principal questions presented by this appeal are (1) whether an employment contract, which expressly provides a fixed monthly compensation for a given number of work hours, but which does not expressly provide the basic or regular hourly rate at which the employee is employed, or allocate the fixed salary to a statutory work week and overtime work, can be construed to provide a "regular rate" by necessary implication so as to meet the requirements of Section 7 of the Act; and (2) if the employment contract can not be so construed, may the employer be excused from the payment of liquidated damages imposed by Section 16(b), because the parties believed in good faith that the employment was not covered by the Act, but if covered, the employment contract fully met its requirements.

According to the unchallenged factual findings of the court, the appellee, Milo Lofton, had for some time prior to the effective date of the Fair Labor Standards Act (October 24, 1938) been employed by the appellant, Seneca Coal and Coke Company, as a night watchman at a strip coal mine owned by appellant. The employment contract expressly provided for a monthly salary of $150, plus 80¢ for each day worked, for which the employee agreed to work 14 hours per day, 6 days each week, or a total of 84 hours. On May 1, 1940, the parties expressly amended the oral contract by reducing the work day from 14 to 12 hours, otherwise the contract remained unchanged and in full force and effect until the employment was terminated on January 8, 1941. Some time prior to May 1, 1940, the employer, after being advised that the employee's services were "probably subject to the Fair Labor Standards Act", but being doubtful of its application, decided to settle with the employee for any overtime compensation due him under the Act. Accordingly on April 27, 1940, the employer paid the employee the sum of $161.67 as full payment for any overtime compensation due him under the Fair Labor Standards Act, and the employee accepted the same without comment or protest.

Effective May 1, 1940, and until December 15, 1940, the employer adopted the practice of allocating the agreed hours worked to the statutory work week (which was 42 hours until October 24, 1940, and 40 hours thereafter), and to overtime for all time worked each week beyond the statutory maximum regular hours for the particular period. This was accomplished by translating the agreed monthly salary into a regular hourly rate of 45¢ for the statutory work week, and one and one-half times that rate or 67½ ¢ per hour for the agreed overtime hours, and the employee was paid at such regular and overtime rates for all work by semimonthly checks, with attachments thereto showing the number of hours worked and the amount earned, which was the agreed monthly salary, with minor exceptions occasioned by hours worked in excess of the contract hours of employment. This change was a bookkeeping transaction only. The employee was not advised of the change in the method of computing his salary, it was not discussed with him, and was not the result of any agreement between the parties to change or modify the original employment contract.

Some time after December 15, 1940, the employer, acting under advice of a representative of the Wage and Hour Division of the Fair Labor Standards Act, determined the regular hourly rate at which the employee was employed by first ascertaining the weekly salary, and dividing the same by the contract hours (84 and 72).¹ Having thus arrived at a regular or basic hourly rate, overtime compensation was computed on the basis of the statutory work week which was applicable to the period of his employment after the effective date of the Act. Based upon the application of this formula, the employer paid the employee an additional sum of $816.72 on December 27, 1940, which, together with the sum of $161.67 theretofore paid on April 27, 1940, equalled the sum of $987.39 as overtime compensation from the effective date of the Act.

After the employment contract had been terminated on January 8, 1941, the employee brought this suit to recover additional compensation for overtime work, based upon a theory rejected by the trial court, and which was not developed in the briefs because the employee did not appeal. The trial court found that the delay in the payment of the overtime compensation as thus computed was occasioned by the good faith belief of both parties that the services of the employee were not subject to the Fair Labor Standards Act, but if subject to the Act, the employment contract and the payments made thereunder constituted full compliance; that this good faith belief, both in the inapplicability of the Act and compliance therewith if applicable, were caused by confusion concerning these questions, and the payments for overtime compensation were made by the employer voluntarily at its own suggestion when interpretation by the courts made clear the applicability of the Act to the employment in question. The court further found that the employment contract between the parties was intended to fully compensate the employee for all time worked by him, and that it did not require the employee to work in excess of the agreed hours or days for the agreed salary, and in making the contract, neither party intended to violate the law. But the trial court held that since the employment contract providing for a monthly salary for a specified number of hours worked, omitted to expressly provide a regular hourly rate, or for a division of the agreed salary and the agreed work hours into regular and overtime, and separate compensation for regular and overtime, the Fair Labor Standards Act would not permit such omission to be supplied by implication. The court concluded that the employee had, in accordance with his contract, worked in excess of the statutory maximum number of hours, and was therefore entitled to be compensated therefor at the rate of one and one-half times his regular hourly rate, determinable by dividing his total weekly salary by the total hours worked.

In addition to the amounts paid by the employer to the employee voluntarily in the sum of $978.39, the court found that the employer had erroneously deducted one-half hour lunch periods from the work day, and accordingly determined that the employer was indebted to employee for additional overtime compensation in the sum of $19.89, representing the total one-half hour lunch periods deducted by employer during the period of his employment while the Act was applicable. On this basis, the court found that the employee was entitled to a total of $998.28 overtime compensation, of which he had heretofore been voluntarily paid the sum of $978.39, leaving a balance of $19.89 unpaid, for which the court gave judgment, together with the equal sum of $998.28 as liquidated damages, or...