International Ladies' Garment Workers' Union v. Donovan, No. 82-2133

CourtU.S. Court of Appeals — District of Columbia Circuit
Writing for the CourtBefore WRIGHT and EDWARDS, Circuit Judges, and McGOWAN; HARRY T. EDWARDS
Citation722 F.2d 795,232 U.S.App.D.C. 309
Decision Date29 November 1983
Docket NumberNo. 82-2133
Parties26 Wage & Hour Cas. (BN 829, 232 U.S.App.D.C. 309, 99 Lab.Cas. P 34,462 INTERNATIONAL LADIES' GARMENT WORKERS' UNION, et al., Appellants, v. Raymond J. DONOVAN, et al.

Page 795

722 F.2d 795
26 Wage & Hour Cas. (BN 829, 232 U.S.App.D.C. 309,
99 Lab.Cas. P 34,462
INTERNATIONAL LADIES' GARMENT WORKERS' UNION, et al., Appellants,
v.
Raymond J. DONOVAN, et al.
No. 82-2133.
United States Court of Appeals,
District of Columbia Circuit.
Argued Sept. 12, 1983.
Decided Nov. 29, 1983.

Page 798

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 81-2606).

Stephen J. Pollak, Washington, D.C., with whom S. Elizabeth Gibson, Andrew H. Marks, Washington, D.C., and Max Zimny, New York City, were on brief, for appellants.

Marilyn S.G. Urwitz, Atty., Dept. of Justice, Washington, D.C., with whom J. Paul

Page 799

McGrath, Asst. Atty. Gen., Robert S. Greenspan, Atty., Dept. of Justice, and Ruth Peters, Atty., Dept. of Labor, Washington, D.C., were on brief, for appellees, Donovan, et al.

Joseph D. Alviani and Robert R. Ruddock, Boston, Mass., were on brief, for appellees, Breen, et al.

Patricia A. Embrey, Washington, D.C., was on brief, for appellee, Stowe Woolens, Ltd.

Michael E. Avakian, Center on National Labor Policy, Inc., North Springfield, Va., for amicus curiae.

Before WRIGHT and EDWARDS, Circuit Judges, and McGOWAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge EDWARDS.

HARRY T. EDWARDS, Circuit Judge:

This action arises out of the decision of the Secretary of Labor (hereinafter "the Secretary") to rescind longstanding restrictions on the employment of workers in their homes (homeworkers) in the knitted outerwear industry. 46 Fed.Reg. 50,349 (1981). The knitted outerwear industry consists of those firms that knit from yarn and, in the same establishment, further manufacture, dye or finish knitted garments, garment sections, or accessories for use as external apparel, and those firms that manufacture bathing suits from any purchased fabric. 29 C.F.R. Sec. 530.1(f) (1981) (rescinded by 46 Fed.Reg. 50,349 (1981)). This industry employs approximately 63,000 production workers. 46 Fed.Reg. 50,349 (1981).

The appellants--knitted outerwear manufacturers and manufacturers' associations, labor organizations representing factory workers in the industry, and state labor law enforcement officials--brought suit, principally arguing that the rescission was arbitrary and capricious within the meaning of Sec. 10(e) of the Administrative Procedure Act (hereinafter the "APA"), 5 U.S.C. Sec. 706(2)(A) (1982). Their concern is that when homeworkers are employed it is not possible effectively to enforce the minimum wage, overtime compensation and child labor provisions of the Fair Labor Standards Act of 1938 (hereinafter "the Act"), 29 U.S.C. Secs. 201-219 (1976 & Supp. V 1981). They also claim that payment of subminimum wages to homeworkers in the industry will cause competitive injury to employers complying with the Act and will drive down the wages of all employees in the industry. The District Court denied the appellants' motion for summary judgment and granted summary judgment for the appellees.

Because we find that the Secretary's decision was arbitrary and capricious, we reverse the decision of the District Court and vacate the action of the Secretary rescinding restrictions on the employment of homeworkers. We will remand the case to the District Court with instructions to return the matter to the Secretary for further proceedings, as may be appropriate, consistent with the opinion of this court.

I. BACKGROUND

A. The History of Restrictions on Industrial Homework

To appreciate the significance of the Secretary's decision, one must first understand the historical context in which it arose. The concerns about industrial homework raised by the appellants echo those voiced by critics of substandard labor conditions throughout this century. See WAGE & HOUR DIV., U.S. DEP'T OF LABOR, IN THE MATTER OF THE RECOMMENDATION OF INDUSTRY COMMITTEE NO. 32 FOR A MINIMUM WAGE RATE IN THE KNITTED OUTERWEAR INDUSTRY AND INDUSTRIAL HOME WORK IN THE KNITTED OUTERWEAR INDUSTRY, FINDINGS AND OPINION OF THE ADMINISTRATOR 13 (1942) (hereinafter "1942 FINDINGS"), reprinted in I Joint Appendix ("J.A.") 79 ("The problems inherent in [homework] have been recognized for a long period of time."). The history of legislative attempts to remedy such concerns evinces an evolving recognition of the need for restriction, rather than mere regulation, of industrial homework in industries in which it is pervasive.

Regulation of homework was initially undertaken by the states around the turn of the century. Between 1871 and 1904, twelve states enacted statutes either barring

Page 800

conversion of homes into industrial workshops or requiring inspection and registration of homework. Comments of International Ladies' Garment Workers' Union 10 (July 1, 1981) (hereinafter "ILGWU Comments"), reprinted in II J.A. 308. In the early 1900's, commissions in at least two of these states reported that regulatory efforts had been failures. Id. at 13, II J.A. 311 (quoting reports from Pennsylvania and Massachusetts). A commission in New York found that

[h]ome work means unregulated manufacturing carried on beyond the possibility of control as to hours of women's work, child labor, night work of minors or cleanliness and sanitation of work places. From the point of view of the community the greatest objection to home work is its essential lawlessness.

Quoted in 1942 FINDINGS, supra, at 13, reprinted in I J.A. 79 (footnote omitted).

By the mid-1930's, there was increasing support for the prohibition of homework. 1 Under the National Industrial Recovery Act, codes of fair competition were drawn up for 556 industries, and provisions for regulation or prohibition of homework were included in 118. Approximately one hundred of the codes "provided for the complete abolition of homework." BRANCH OF RESEARCH & STATISTICS, WAGE & HOUR & PUBLIC CONTRACTS DIV., DEP'T OF LABOR, EMPLOYMENT OF HOMEWORKERS UNDER THE FAIR LABOR STANDARDS ACT 15 (1959) (hereinafter "1959 REPORT"), reprinted in II J.A. 489. The National Industrial Recovery Act subsequently was found unconstitutional by the Supreme Court in Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570 (1935). However, one year later the United States' Children's Bureau reported on the relative effectiveness of prohibition and regulation under the codes prior to Schechter:

Great gains were made where the codes prohibited the giving out of home work. But in the industries in which home work was still permitted, even though limited by certain regulations, the ancient evils continued to exist and to constitute a menace to the higher labor standards that had been achieved for factory workers.

U.S. CHILDREN'S BUREAU, INDUSTRIAL HOMEWORK UNDER THE NATIONAL RECOVERY ADMINISTRATION 21 (1936), quoted in ILGWU Comments, supra, at 14, reprinted in II J.A. 312 (footnote omitted).

In 1938, Congress passed the Fair Labor Standards Act of 1938, 2 the "central aim" of which "was to achieve, in those industries within its scope, certain minimum labor standards." Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 292, 80 S.Ct. 332, 335, 4 L.Ed.2d 323 (1960). See also Southland Gasoline Co. v. Bayley, 319

Page 801

U.S. 44, 48, 63 S.Ct. 917, 919, 87 L.Ed. 1244 (1943). 3 The Act established minimum hourly wages for employees, 4 limited the number of hours employees could work without receiving overtime compensation, 5 and prohibited oppressive child labor. 6 Section 11(c) of the Act required employers to keep and make available records of employees' wages and hours. 7 Shortly after passage of the Act, the Administrator (hereinafter "the Administrator") of the Wage and Hour Division (hereinafter "the Division") issued a statement interpreting the Act to cover workers whether they worked at home or in the factory. See 1959 REPORT, supra, at 18, reprinted in II J.A. 492. All employers of homeworkers were required to keep special records indicating the identity of homeworkers and the time worked and piece rates paid with respect to each lot of work issued. See 1942 FINDINGS, supra, at 19-20, reprinted in I J.A. 85-86. Employers were also required to obtain handbooks from the Division and distribute them to homeworkers they employed so that the homeworkers would have records of times worked and rates paid. These handbooks would be retained by the homeworker except during the time necessary for the employer to complete a periodic entry required by the regulations. Id. at 20, I J.A. 86.

Soon after the promulgation of these regulations, pressures to prohibit homework intensified. A number of states had taken such action, 8 and a 1940 national conference on labor legislation composed of government representatives from almost every state recommended that the Division seriously consider prohibition of industrial homework. Id. at 13, I J.A. 79. Between 1941 and 1943, the Division held hearings "for seven industries in which homework was most prevalent and in which violations of the Fair Labor Standards Act had been a problem" (1959 REPORT, supra, at 19, reprinted in II J.A. 493): the jewelry, knitted outerwear, gloves and mittens, button and buckle, embroidery, handkerchief and women's apparel industries.

One outgrowth of these hearings, and the related investigations of the Division, was a series of reports issued by the Division. Because the reports represent the most comprehensive analysis by the Department of Labor (hereinafter "the Department") of homework and methods of regulating it, we deem it appropriate to summarize at length the conclusions of the report dealing with the knitted outerwear industry. 9 The Administrator reported that officials charged with enforcing the Act "are of the opinion that there is almost universal violation of the record-keeping requirements of the Wage and Hour Division with respect to home workers." 1942 FINDINGS, supra, at 22, reprinted in I J.A. 88. Actual inspection

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