Fruco Const. Co. v. McClelland

• Decision Date: 03 December 1951
• Docket Number: No. 14286.,14286.
• Citation: 192 F.2d 241
• Parties: FRUCO CONST. CO. v. McCLELLAND et al.
• Court: U.S. Court of Appeals — Eighth Circuit

192 F.2d 241 (1951)

FRUCO CONST. CO. v. McCLELLAND et al.

No. 14286.

United States Court of Appeals Eighth Circuit.

November 8, 1951.

Rehearing Denied December 3, 1951.

Jacob M. Lashly, St. Louis, Mo. (Arthur V. Lashly, Edmond A. B. Garesche, David H. McGhee, and Lashly, Lashly & Miller, St. Louis, Mo., were with him on the brief), for appellant.

Arnot L. Sheppard, St. Louis, Mo. (Dennis E. Woodside, St. Louis, Mo., was with him on the brief), for appellees.

Before GARDNER, Chief Judge, and WOODROUGH and THOMAS, Circuit Judges.

THOMAS, Circuit Judge.

In December, 1940, the appellant, Fruco Construction Company, entered into a cost-plus-fixed-fee contract with the United States to construct the numerous buildings, roadways, sidewalks and other structures at St. Louis, Missouri, known as the St. Louis Ordnance Plant or the Small Arms Ammunition Plant.

The appellees, plaintiffs in the trial court, who were employed at the plant as construction guards, brought this action against the appellant under the Fair Labor Standards Act of 1938, 29 U.S.C.A. §§ 201 to 219, to recover for the period between October 13, 1941, and October 15, 1942, overtime compensation, liquidated damages, a reasonable attorneys' fee, interest and costs. The appellant denied liability.

The court appointed a special master who heard the testimony, made findings of fact and conclusions of law favorable to the appellees, to which appellant filed exceptions. The exceptions were overruled and the court adopted the findings of fact and conclusions of law of the special master and entered judgment against the appellant for $60,247.35 as overtime compensation, an equal amount as liquidated damages, and $11,250 attorneys' fees and costs, a total of $131,744.70.

The appellant contends here, as it did in the trial court, that the special master and the court erred in finding and holding:

1. That the appellant was the employer of the appellees in whose favor judgment was rendered, in that within the definition of the term employer as defined in the Act the United States government was their employer;

2. That the appellees were engaged in activities necessary to the production of goods for commerce within the meaning of the Act;

3. That appellant is not exempt from liability for overtime compensation under § 9 of the Portal to Portal Act because omission to pay overtime compensation was not in good faith;

4. That appellant is not exempt from liability for liquidated damages under § 11 of the Portal to Portal Act of 1947, 29 U. S.C.A. § 260;

5. That the claims of certain designated groups of the appellees were not barred by the Missouri five-year statute of limitations.

The material evidentiary facts and the applicable statutes are not in dispute. Only inferential facts and applicability of the statutes are involved.

We shall first consider appellant's contention that it was not the employer of the appellees but that they were employees of the government.

Section 3 of the Fair Labor Standards Act, 52 Stat. 1060, 29 U.S.C.A. § 203, provides: "As used in sections 201-219 of this title — * * *

"(d) `Employer' includes any person acting directly or indirectly in the interest of an employer in relation to an employee but shall not include the United States * * *

"(e) `Employee' includes any individual employed by an employer. * * *

"(g) `Employ' includes to suffer or permit to work."

The facts relevant to this issue in brief are as follows:

The appellant's contract with the government was dated December 11, 1940, and construction of the plant was commenced in January, 1941. At that time Colonel David L. Van Syckle was assigned by a special order of the War Department to command the St. Louis Ordnance Plant. He was charged with disciplinary protection of the plant site. Protection of the construction area was delegated by the commanding officer, by orders of the War Department in Washington, to the Constructing Quartermaster, and later to the Area Engineer. After December 15, 1941, all construction activities of the army were by law placed under the jurisdiction of the Corps of Engineers. Thereafter the chain of command was from the Chief of Engineers in Washington, D. C., to the Division Engineer; from the Division Engineer to the District Engineer; from the District Engineer to the Area Engineer, and from him to the Contractor.

Soon after the appellant commenced performance of the contract it became apparent that guards were needed. Early, therefore, in 1941, at the instance of the Constructing Quartermaster, the appellant entered into a subcontract with the Burns Detective Agency, by the terms of which the Burns Agency employed and furnished guards at the plant site in consideration for which the appellant paid the Burns Agency at the rate of 75 cents per hour for each guard furnished.

Shortly before October 12, 1941, the arrangement with the Burns Agency was terminated as of October 13, 1941, by order of the Constructing Quartermaster. Thereafter the Constructing Quartermaster employed and supervised the guards. The appellant had nothing to do with employing, supervising, directing or discharging them. When a guard was employed the appellant was notified and instructed to place his name upon appellant's payroll. In a letter to the appellant from the Constructing Quartermaster's office dated October 14, 1941, interpreting the official instructions appellant was advised that "the guard is of necessity a part of the CQM Constructing Quartermaster force of the payroll of the cpff cost-plus-fixed-fee contractor and the control of the guard, excepting for pay, is vested in the constructing quartermaster, the guard officer being delegated authority to issue orders and instructions to the guard." After this arrangement was made the constructing quartermaster or his successor, supplied the appellant each week with a list of guards on duty during the week with the number of hours each had been on duty, and the appellant paid them the wages to which they were entitled.

In October, 1942, a further change was made in the method of handling the guards by which they became civil service employees of the United States, and they were no longer carried on the appellant's payroll.

Under the undisputed facts in this case we are convinced that the special master and the court erred as a matter of law in holding that the construction guards, appellees here, were employees of the appellant contractor and not of the government within the meaning of the Fair Labor Standards Act, supra. In the case of Walling v. Sanders, 6 Cir., 136 F.2d 78, 81, the court say: "The usual test by which, in common experience, men determine the employer, is to ascertain who has authority on his own account to `hire and fire.'"

In 56 C.J.S., Master and Servant, it is said, in § 1, "The relation of master and servant is that which arises out of an express or implied contract of employment between a master or employer on the one hand and a servant or employee on the other"; and in § 2, "The essential characteristic of the master and servant relation is the retention by the employer of the right to direct and control the manner in which the work shall be performed, * * *." See, also, 35 Am.Jur., Master and Servant, § 2.

In Bartels v. Birmingham, Collector, 332 U.S. 126, 130, 67 S.Ct. 1547, 1550, 91 L.Ed. 1947, the Supreme Court say: "Obviously control is characteristically associated with the employer-employee relationship but in the application of social legislation employees are those who as a matter of economic reality are dependent upon the business to which they render service." In this instance the service rendered by the guards was the protection of government property.

Applying these tests to the facts here, the construction guards were employees of the government within the meaning of the Fair Labor Standards Act. See, also, Lewis v. Virginia Engineering Co., Inc., D.C., 80 F.Supp. 886. When the contract with the Burns Agency was cancelled in 1941, the Constructing Quartermaster's office assumed complete charge of the construction guards. All the guards made application for employment on forms headed: "War Department, Office of the Constructing Quartermaster, Application for Employment As a Member of the Guard." They were employed by the Quartermaster and controlled by the government officers in every particular. The appellant could neither direct, nor hire, nor fire them.

On this point the case differs from the situation presented in the case of Powell v. United States Cartridge Co., 339 U.S. 497, 70 S.Ct. 755, 758, 94 L.Ed. 1017. In the Powell case it was admitted that the petitioners employed in the safety department of the ammunition factory were employees of the Cartridge Company. In that case the evidence showed that they were to be hired, assigned, directed, supervised, paid and discharged by the company. There the contract between the government and the company provided that all persons engaged in the work "shall be subject to the control and constitute employees of the Contractor." The opposite of all these conditions existed in the present case.

But it is said the arrangement by which the appellant paid the guards compels the conclusion that they were employees of the appellant. Here the Quartermaster's office made out a time card for each guard and delivered it to the appellant. The appellant paid the guard and was reimbursed by the government. All the orders and directives made it clear that the guards were employees of the government and not of the appellant. See Cosmopolitan Shipping Co. v. McAllister, 337 U.S. 783, 800, 69 S.Ct. 1317, 93 L. Ed. 1692. Further, the evidence discloses that the arrangement for payment of the guards through the office of the appellant was made for the convenience of the government. Had such an arrangement for payment of the wages of the guards been made with a bank it could not be said that the bank was the employer....