Mitchell v. Ballenger Paving Company

• Decision Date: 06 February 1962
• Docket Number: No. 18714.,18714.
• Citation: 299 F.2d 297
• Parties: James P. MITCHELL, Secretary of Labor, United States Department of Labor (Arthur J. Goldberg, Secretary of Labor, substituted as party appellant in the place and stead of James P. Mitchell, Resigned), Appellant, v. BALLENGER PAVING COMPANY, Inc., Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

299 F.2d 297 (1962)

James P. MITCHELL, Secretary of Labor, United States Department of Labor (Arthur J. Goldberg, Secretary of Labor, substituted as party appellant in the place and stead of James P. Mitchell, Resigned), Appellant, v. BALLENGER PAVING COMPANY, Inc., Appellee.

No. 18714.

United States Court of Appeals Fifth Circuit.

February 6, 1962.

Bessie Margolin, Asst. Sol., Jacob I. Karro, Atty., Charles Donahue, Sol. of Labor, Isabelle R. Cappello, Atty., Dept. of Labor, Washington, D. C., Beverley R. Worrell, Regional Atty., Birmingham, Ala., for appellant.

C. T. Wyche, Greenville, S. C., John Izard, Jr., Atlanta, Ga., John Izard Jr., Atlanta, Ga., and Spalding, Sibley, Troutman, Meadow & Smith, Atlanta, Ga., Wyche, Burgess & Wyche, Greenville, S. C., of counsel, for appellee.

Before TUTTLE, Chief Judge, and CAMERON and BROWN, Circuit Judges.

TUTTLE, Chief Judge.

The Secretary of Labor appeals from the denial by the trial court of an injunction against future violations of the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq.

The employer in this case is engaged in the paving contracting business. The violations giving rise to the litigation occurred principally out of contracts for the paving of facilities at military air bases. There were other violations that occurred during ordinary road paving jobs. The total amount of wages unpaid to employees which, under the concession finally made by the employer would have been due his employees if the Act had been complied with, is approximately $39,000. Of this amount about $2,400 represented unpaid wages on the road construction projects.

The employer originally defended the action on the ground that airport construction dealt with instrumentalities of war and was therefore not a part of commerce or the production of goods for commerce. The only reason given for failures to comply with respect to the road paving jobs was that these items were inadvertently overlooked because the contracts were with Army Engineers. The failure of compliance occurred continuously beginning four years prior to the date of trial, in March, 1955, down to April 23, 1959.

During the year 1955 the employer was advised by the Department of Labor that the Act was applicable to its military projects. Ballenger declined to comply, stating that he could not follow the department's reasoning, that none of his competitors were doing it, and stating further that he felt if the Act was supposed to apply it would have been written into the contract. On May 31, 1956, Ballenger's counsel wrote to the Department that "according to his information, there is no law requiring overtime compensation for hours worked in excess of forty in a work week to employees employed on air fields or similar military construction." On November 16, 1956, the Labor Department's Regional Attorney called counsel's attention to several cases, including Mitchell v. H. B. Zachry, 127 F.Supp. 377, a District Court decision exactly in point. Counsel replied, stating: "We feel that it is contrary to accepted law and we, of course, are not bound by it even if the factual situation were analogous." In May, 1957, defendant was advised by the Labor Advisor for the Corps of Engineers that it was a contractor's responsibilities to check with the Department of Labor as to coverage under the Fair Labor Standards Act. Twice in 1957 the employer was advised by a Labor Department representative that its air field operations were covered and that it was violating the Act in not complying with its terms. On October 18, 1957, this suit was filed.

On June 30, 1958, this Court decided the case of Mitchell v. Empire Gas Engineering Co., 5 Cir., 256 F.2d 781. In that case this Court expressly held that a contractor in the position of the appellee here was covered by the Fair Labor Standards Act. On or about January 23, 1959, in a conference between attorneys for the Secretary of Labor and counsel for the employer in the pending litigation, the Empire Gas Engineering Company case was called to the attention of employer's counsel. This was communicated to Ballenger's general counsel in Greenville, South Carolina, in a letter dated February 5, 1959. By a letter dated February 10th, the general counsel acknowledged receipt of this information, and stated: "It seems to me that the Empire Gas Engineering case is the coup de grace to our position." Then follows the following pertinent comment: "My present inclination is to now advise Ballenger that it must comply with the FLSA and see if we can get a dismissal without an injunction based on our agreement to so abide. If you agree with this, let me know and I will take it up with Ballenger to see what his reaction is." The record is silent as to any other intercounsel communications. However, it is not disputed that it was near the end of February before counsel actually notified Ballenger of his legal opinion. Even on this advice from counsel, Ballenger, without being advised to do so, still delayed compliance. The reason he gave was expressed in the following words:

"I felt like that the case might not have been a contested case; that Empire Gas worked a lot of union crafts in which they would have to pay time and a half over both eight and forty anyway, and I thought it was to our interest to find out whether or not that was a contested case."

Thus it is that even after Ballenger was informed by his lawyer that its operation was covered by the Act, the Company continued until April 23rd, or at least six weeks longer of illegally computed weekly payrolls before it came into compliance. The Government points to the further significant fact that the letter signifying compliance was sent out shortly after the secretary filed notice that depositions would be taken on April 29th, the week following Ballenger's ordered compliance.

In August, 1959, a pre-trial hearing was held and at that time the trial court in its pre-trial order stated: "The defendant concedes that a * * * decision by the Court of Appeals for the Fifth Circuit indicates that defendant has violated the Act. Defendant contends that said decision erroneously construes the Act." Thus, it appears that even at that time the employer was still reserving its argument to test coverage. However, by the time the case came on for trial, this position was finally abandoned and the trial turned solely on the question whether an injunction should issue. The critical findings of fact by the trial court were as follows:

2 — For several years prior to April, 1959, there existed in the mind of defendant and its executives, as to whether defendant\'s operations in connection with runways on military air bases came within the provisions of said Act. It was generally believed among such contractors that the Act did not apply and defendant company was so advised by able counsel. The belief that the Act did not apply was encouraged and fostered by other departments of the United States Government whose primary interest was not to enforce the Fair Labor Standards Act but to save as much money as possible in regard to such operations.¹

3 — In July, 1958, the Fifth Circuit Court of Appeals decided the case of Mitchell v. Empire Gas Engineering Company, 256 F.2d 781, which put at rest the confusion above referred to. Defendant and its executives did not for a period of time get actual knowledge of this decision, there being testimony that it did not at once come to the attention of attorneys then representing defendant company, and even then that it was necessary for counsel to contact Empire Gas Engineering Company and ascertain the actual questions involved in the case. As stated above, this period of delay is the only factor or neglect upon the part of defendant company. However, this Court is accepting the sworn statement of the defendant company, its executives and the attorneys, all reputable men, to the above effect.

We are unable to find support for the findings of the trial court to the effect that the belief that the Act did not apply was encouraged and fostered by other departments of the United States Government. It is true that the paving contracts expressly included provisions that the terms of the Davis-Bacon Act and the eight-hour law were to be complied with. This followed simply because Federal statutes required that the contracts make specific reference to these acts. It is undisputed, however, that the employer was repeatedly told that the coverage under the wage and hour law was not passed upon by the contracting authority, but was referable to the Labor Department.

It is also plain that there is no actual evidence when the knowledge of Mitchell v. Empire Gas Engineering Company come to the attention of Ballenger's counsel. The only evidence is that it was called to their attention by the Wage and Hour attorneys on January 23, 1959. This was still not brought to the attention of Ballenger until the end of February and even then Ballenger declined to accept the opinion of his lawyer until he decided, without suggestion of his counsel, to satisfy himself that it was actually binding.

This court has recently had presented to it a number of appeals from the refusal of a trial court to grant an injunction where compliance has finally been conceded after substantial loss of wages to employees. In most of these cases, the argument is made that a good faith reliance on advice of counsel justifies the course of conduct followed by the employer and this factor looms large in the decision of the trial courts in denying an injunction.

Whereas we have recognized that an injunction does not follow as a matter of course upon either a finding or stipulation of violation of the act, Mitchell v. Hodges Contracting Co., 5th Cir., 283 F.2d 380 and Mitchell v. Strickland Transportation Co., 5th Cir., 267 F.2d 821, we have nevertheless not hesitated to reverse an order of the trial court denying an injunction when it is clear that its...