Chambers Construction Company v. Mitchell

• Decision Date: 05 June 1956
• Docket Number: No. 15452.,15452.
• Parties: CHAMBERS CONSTRUCTION COMPANY, a Corporation, and L. H. Chambers, Appellants, v. James P. MITCHELL, Secretary of Labor, United States Department of Labor, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

233 F.2d 717 (1956)

CHAMBERS CONSTRUCTION COMPANY, a Corporation, and L. H. Chambers, Appellants, v. James P. MITCHELL, Secretary of Labor, United States Department of Labor, Appellee.

No. 15452.

United States Court of Appeals Eighth Circuit.

June 5, 1956.

COPYRIGHT MATERIAL OMITTED

Max Kier, Lincoln, Neb., for appellants.

Sylvia S. Ellison, Attorney, U. S. Dept. of Labor, Washington, D. C., (Stuart Rothman, Solicitor, Bessie Margolin, Asst. Solicitor, William W. Watson, Attorney, Washington, D. C., and Harper Barnes, Regional Attorney, U. S. Dept. of Labor, Kansas City, Mo., on the brief), for appellee.

Before STONE, JOHNSEN and VOGEL, Circuit Judges.

VOGEL, Circuit Judge.

Appellants, Chambers Construction Company and L. H. Chambers, its president, personally, have been enjoined by the District Court from violating the provisions of Section 15(a) (1, 2, 5), 29 U.S.C.A. § 201 et seq., of the Fair Labor Standards Act of 1938, as amended. These sections respectively make unlawful delivery or sale of goods produced in violation of the Act, violations of overtime provisions, § 7, and violations of various record-keeping requirements, § 11(c), set out in agency regulations. Appellants' main defense is, and was, that the activities of the employees involved were outside the scope of the Act because not engaged "in commerce", or "in the production of goods for commerce".

Chambers Construction Company is a Nebraska corporation having its principal place of business in the City of Lincoln, Nebraska. The president and general manager of the firm, L. H. Chambers, owns 450 shares of the corporate stock, while his wife, the corporation's secretary, owns 50 shares. These two holdings comprise the entire stock ownership of the corporation. The company is engaged in the general contracting business, specializing in construction and reconstruction work upon municipal water and sewer systems in Nebraska and other states.

On or about December 28, 1948, the company contracted with the City of Beatrice, Nebraska, for the construction of a segment of the city's water supply main crossing the Big Blue River. This new segment (a 16-inch pipe 221 feet long) was intended to be a replacement for a similar segment which, for reasons of safety and security, had to be abandoned. The contract also involved certain piping changes and valve installations. Work on the proposed replacement took place while the old main was still being used, the plan being that the new line would be interspliced on completion with a minimum of interference with the city's water supply intake.

The water carried by the supply main at the time in question was used by the City of Beatrice and was sold by the city to its customer water users, some of which were railroads engaged regularly and continuously in interstate commerce. Other users included industrial firms using the water in various ways incident to manufacture of their products, which products were distributed and sold in interstate commerce.

During the progress of work on the Beatrice job, it is conceded for our purposes that four workmen, whose work was necessary to the performance of the contract, worked over 40 hours in certain weeks and were not paid time and one-half for the hours worked over 40, nor were adequate records kept, both being violations of the Act if such employees were, under the provisions of the Act, engaged "in commerce" or in "production of goods for commerce".

At this and other times set out in the evidence, two timekeepers were in the company's employ. These employees accompanied the work crews to the construction sites and kept time and progress records which would be mailed to the home office. Employees' checks were then made out from the submitted records and sent to and distributed by the timekeepers. At the time stated in the instant complaint, these timekeepers were working outside the State of Nebraska. At the home office in Lincoln, Nebraska, the company employed a secretary and two "take-off" clerks. The "take-off" work consisted of ascertaining and classifying quantities of work from blueprints of prospective construction jobs, with the data thus obtained utilized in submitting bids on the various jobs, some within and some without Nebraska. The secretary would send letters in connection with the business, keep books and issue salary checks computed from records sent by the timekeepers. Many of the letters and checks were sent beyond Nebraska. It is sufficient for our purposes to assume that the wage or record-keeping policies of the company concerning each of these "clerical" workers was a technical violation of the Act, if the Act applies. It is to this latter hypothesis that appellants direct the greater force of their brief and argument.

Appellants assert, correctly, that "the nature of the employer's business is not determinative, the application of the Act depending upon the character of employees' activities and not the nature of the employer's business". A. B. Kirschbaum Co. v. Walling, 1942, 316 U.S. 517, 62 S.Ct. 1116, 86 L.Ed. 1638; McLeod v. Threlkeld, 1943, 319 U.S. 491, 63 S.Ct. 1248, 87 L.Ed. 1538; Helena Glendale Ferry Co. v. Walling, 8 Cir., 1942, 132 F.2d 616. With this premise, we will consider each employee group separately.

Concerning the activity of the construction workers on the Beatrice job, appellants aver that they, as the employer, proceeded on the good faith assumption that the construction being an entirely new main, designed for later use in connection with an existing water facility, such construction was not interstate commerce though eventually some persons engaged in interstate commerce might be served thereby. Appellants assert they relied on Wage and Hour Interpretative Bulletin No. 5, December 2, 1938, BNA, 1944-1945, WH Man. 23, wherein the agency stated:

"The employees of local construction contractors generally are not engaged in interstate commerce and do not produce any goods which is shipped or sold across state lines. Thus, it is our opinion that employees engaged in the original construction of buildings are not generally within the scope of the Act, even if the buildings when completed will be used to produce goods for commerce * * *." (Emphasis supplied.)

See also Koepfle v. Garavaglia, 6 Cir., 1952, 200 F.2d 191; Moss v. Gillioz Const. Co., 10 Cir., 1953, 206 F.2d 819.

The trial court, following the so-called "new construction rule", stated:

"* * * that the construction of an entirely new facility, e. g. a highway, which after construction is utilized for interstate commerce is not within the reach of the Act."

But the court concluded:

"But the improvements in those cases are not comparable to replacement of the river crossing in the Beatrice water main. The erection which was made under the Beatrice contract was not susceptible of use by itself or otherwise than through its incorporation into the long water carrying main in replacement of the former river crossing segment. * * * The so-called `new\' segment is a replacement or repair designed only for that purpose and of no value or service otherwise."

Since the opinion of the District Court was written, the United States Supreme Court, in Mitchell v. C. W. Vollmer & Co., Inc. (dec. June 6, 1955) 349 U.S. 427, 75 S.Ct. 860, 99 L.Ed. 1196, has considered the "new construction rule". The construction in that case was a lock and canal which would form part of the Gulf Intercoastal Waterway, and which was designed as an alternate route to an inadequate existing lock and canal. The Supreme Court, after citing Raymond v. Chicago, M. & St. P. R. Co., 1917, 243 U.S. 43, 37 S.Ct. 268, 61 L.Ed. 583, which was a precursor of the "new construction rule", stated, 349 U.S. at page 429, 75 S.Ct. at page 862:

"We do not think that case should control this one. We are dealing with a different Act of another vintage — 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 engaged `in commerce\' within the meaning of the present Act is determined by practical considerations, not by technical conceptions. See Walling v. Jacksonville Paper Co., 317 U.S. 564, 570, 63 S.Ct. 332, 336, 87 L.Ed. 460; Overstreet v. North Shore Corp., 318 U.S. 125, 128, 130, 63 S.Ct. 494, 496, 497, 87 L.Ed. 656. The test is whether the work is so directly and vitally related to the functioning of an instrumentality or facility of interstate commerce as to be, in practical effect, a part of it, rather than isolated local activity. See McLeod v. Threlkeld, 319 U.S. 491, 497, 63 S.Ct. 1248, 1251, 87 L.Ed. 1538. Repair of facilities of interstate commerce is activity `in commerce\' within the meaning of the Act, as we held in J. F. Fitzgerald Const. Co. v. Pedersen, 324 U.S. 720, 65 S.Ct. 892, 89 L.Ed. 1316. And we think the work of improving existing facilities of interstate commerce, involved in the present case, falls in the same category." (Emphasis supplied.)

Although appellants are not convinced (because of lack of specific reference to the decisions of the various courts applying the "new construction rule") that Mitchell v. C. W. Vollmer & Co., Inc., has overturned the rule, they concede that it has been "affected" and then state that until Vollmer the construction involved would not have come under the Act.

At this point it is argued that since the Vollmer case was not decided until after the instant violations or action, and since the decision is at least a change in the law, there was no violation in 1948 or 1949 because to everyone concerned the construction employees were not at that time engaged "in commerce" under the Act. See Interp. Bull., supra.

In our opinion, the Vollmer decision infers that the "new construction rule" is not applicable to the repair or replacement of existing facilities....