McComb v. Utica Knitting Co.

• Decision Date: 18 December 1947
• Docket Number: No. 49,Docket 20715.,49
• Parties: McCOMB, Adm'r of Wage and Hour Div., U. S. Dept. of Labor, v. UTICA KNITTING CO.
• Court: U.S. Court of Appeals — Second Circuit

164 F.2d 670 (1947)

McCOMB, Adm'r of Wage and Hour Div., U. S. Dept. of Labor, v. UTICA KNITTING CO.

No. 49, Docket 20715.

Circuit Court of Appeals, Second Circuit.

November 19, 1947.

Rehearing Denied December 18, 1947.

William S. Tyson, Sol., Bessie Margolin, Asst. Sol., Morton Liftin, Acting Asst. Sol., and Frederick U. Reel, and Morton Liftin, Attys., U. S. Department of Labor, all of Washington, D. C. (John A. Hughes, Regional Atty., of New York City, of counsel), for plaintiff.

Ferris, Burgess, Hughes & Dorrance, of Utica, N. Y. (Thayer Burgess and Russell G. Dunmore, Jr., both of Utica, N. Y. of counsel), for Utica Knitting Co.

Before AUGUSTUS N. HAND, CLARK, and FRANK, Circuit Judges.

FRANK, Circuit Judge.

This is an action for an injunction to prevent defendant from violating the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., with respect to 59 of defendant's employees out of a total which varies from 2,200 to 3,000. As the district judge found, defendant, which manufactures, sells and distributes textile products, operates nine mills; it "produces a fluctuating percentage of its capacity, depending upon factors which seem to be common to the textile industry."

1. As to 14 of the 59 employees in question, defendant asserted in the district court that they were not within the coverage of the Act because they serve in a "bona fide executive * * * capacity" within the meaning of § 13(a) (1) and the Regulations made, pursuant thereto, by the Administrator.¹ The district judge held that but one of these persons was within the exemption. Defendant appeals from that part of the judgment against it which relates to 5 of the other 13 employees.

The district court found as a fact that defendant had not affirmatively proved that, of these five, two, who are mill foremen, "spent not to exceed 20 percent of the number of hours worked in the workweek by the non-exempt employees under their direction in doing work of the same nature as that performed by non-exempt employees." As there is ample evidence to support this finding, it is not "clearly erroneous." Accordingly, defendant, which had the burden of proof, did not show that these employees came under clause (f) of the pertinent Regulations. As to the other three employees, operating engineers in defendant's power plant, the district court found that they "were operating engineers or turbine operators, whose primary duty was the operation and maintenance of important, valuable and complicated machinery. Supervision of firemen and other employees was secondary to their main duty. Their primary duty does not consist in the management of a department of the establishment in which they are employed." On the evidence, this finding must be sustained. Consequently, these men did not come under clause (a) of the pertinent Regulations. As to these five employees, the judgment is affirmed.

2. Forty-five other employees are paid guaranteed salaries under a so-called guaranteed-salary plan. This plan, which came into existence in October or November, 1940, is expressed in letters signed by these persons, of which the following is typical: "This will confirm the previous verbal understanding between us relative to my wages. I am receiving a guaranteed weekly salary of $59 per week for a scheduled work week of 45 hours. My hourly rate is $1.242 per hour for the first 40 hours and time and a half or $1.863 per hour for each hour worked in excess of 40 hours per week. If I work less than my scheduled 45 hours in any work week, I receive my guaranteed weekly salary of $59. If I work over my scheduled 45 hours in any work week, I receive $1.863 per hour in addition to my guaranteed weekly salary of $59. In addition to the above base and overtime pay, I receive any production bonus to which I may be entitled."² Plaintiff contends that payments under this plan do not comply with the overtime requirements of § 7(a) of the Act.³ The district court held that the plan did not meet the statutory requirements in so far as it applied to any of the 45 employees whose average hourly earnings, before they were "placed on the plan," were greater than the hourly rates under the plan, but that the plan was valid as to the remainder of the 45, whether they had previously worked for the defendant or were first hired after the plan became effective. The court entered judgment based on these conclusions. Defendant appeals from that portion of the judgment holding the plan partly invalid, and plaintiff cross-appeals from that portion holding the plan partly valid.

Our decision must turn on the applicability of Walling v. A. H. Belo Corp., 316 U.S. 624, 62 S.Ct. 1223, 86 L.Ed. 1716, in which the Court, because of a guarantee, significantly refused to apply the doctrine, and the "regular rate" formula, announced the same day in Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682. Before the recent decisions in Walling v. Halliburton Oil Well Cementing Co., 331 U.S. 17, 67 S.Ct. 1056, and 149 Madison Ave. Corp. v. Asselta, 331 U.S. 199, 67 S.Ct. 1178, several circuit courts, including this court, had intimated that, in the light of decisions subsequent to Belo — i. e., Walling v. Helmerich & Payne, 323 U.S. 37, Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 65 S.Ct. 1242, 89 L.Ed. 1705; Walling v. Harnischfeger Corp., 325 U.S. 427, 65 S.Ct. 1246, 89 L.Ed. 1711, 65 S.Ct. 11, 89 L.Ed. 29; — the Supreme Court had narrowed the Belo doctrine almost to the vanishing point.⁴ But the opinion in Halliburton, and comments on Belo and Halliburton in Asselta, showed that this view was mistaken. As an intermediate appellate court, occupying a satellite position with a restricted orbit, it is our function to interpret not the statute directly but the Supreme Court's interpretation of the statute.⁵ We must, therefore, now take the Belo doctrine as an established gloss on the Act, one which constitutes an exception to the usual rule — as to the actual "regular rate" — announced in the Missel, Helmerich & Payne, Youngerman-Reynolds and Harnischfeger cases. In other words, a contract rate which, in line with those cases, would otherwise be deemed an artificial regular rate, is not so when the contract provides for a guarantee a la Belo. So here, several facts which undoubtedly would have invalidated the contracts will not do so, if, because of the guarantee, the contracts come within the Belo exception.⁶

We incline to believe that that exception has these limits indicated in the Belo opinion (316 U.S. 635, 62 S.Ct. 1229, 86 L.Ed. 1716):⁷ The mere fact of a guaranteed wage does not suffice; in addition, there must be, as there was in Belo and Halliburton, a condition of irregularity or instability of work, so that the guaranty yields the employees a stability of employment and income otherwise absent. The Supreme Court has not explicitly stated the needed quantum of irregularity, and we must ascertain it with the aid of such guides as the Court has implicitly provided. Since the Court has unequivocally said that Belo was correctly decided, we believe that, if the irregularity in any case is at least as great as in Belo, a fair guarantee will bring that case within the exception.

Whether this case is thus exceptional is a question of fact. In Belo, there was no finding by the district court of the fact of instability, nor did the Supreme Court state any of the details of the evidence pertinent thereto. We have examined the Belo record for such evidence and have set it forth in the Appendix to this opinion; that evidence consists solely of a sampling of time sheets. In the instant case, the trial judge did not discuss this question, nor did he make any finding which bears on it.⁸ All the evidence here of a kind similar to that in the Belo record we have also set forth in our Appendix. As that evidence is entirely documentary, no issue of witness' credibility arises; therefore, we can pass on the facts as well as could the trial judge,⁹ and need not remand for a finding by him. In comparing Belo and this case, we have taken as a yardstick the number of weeks during which the employees, in the respective cases, worked less hours than the statutory minimum (i. e., 44 in Belo and 40 here). On the basis of that comparison, we conclude that the irregularity here was somewhat greater than in Belo. Consequently, and because we consider the guarantee here fair in the circumstances, we hold that the contracts here meet the statutory requirement as construed by the Supreme Court.¹⁰ We may add that, in the record in this case, there is an exhibit showing that employees, under the plan, in 12 percent of the total weeks worked less than the scheduled (i. e., contract) hours;¹¹ this, in and of itself, indicates considerable instability; but, as no such comparable total figures appear in the Belo record, we are unable to make a comparison in that respect between the two cases.

Plaintiff makes much of a sentence in the Asselta opinion (331 U.S. at pages 209, 210, 67 S.Ct. at page 1184), in which the Court said that the Belo-Halliburton exception does not apply unless there is "provision for a guaranteed weekly wage with a stipulation of an hourly rate which under the circumstances presented could properly be regarded as the actual regular rate of pay." We do not agree with plaintiff that this means that the hourly rate must be identical with the actual regular rate in accord with Missel, Asselta, Helmerich & Payne, and Youngerman-Reynolds. We think it means that, where there concur (a) enough irregularity and (b) a fair guarantee, then the contract rate is to be "regarded as" the equivalent of the actual rate, i. e., as a substitute therefor. Plaintiff also seeks to differentiate the instant case from Belo and Halliburton on the ground that the agreements there provided for overtime compensation at "not less than one-and-one-half times" the contractual hourly rates, while...