Mitchell v. John R. Cowley & Bro., Inc., 18440.

• Decision Date: 23 June 1961
• Docket Number: No. 18440.,18440.
• Citation: 292 F.2d 105
• Parties: James P. MITCHELL, Secretary of Labor, United States Department of Labor (Arthur J. Goldberg, Secretary of Labor, substituted as party appellant in place and stead of James P. Mitchell, resigned), Appellant, v. JOHN R. COWLEY & BRO., INC., and Marine Junk Company, Inc., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

292 F.2d 105 (1961)

James P. MITCHELL, Secretary of Labor, United States Department of Labor (Arthur J. Goldberg, Secretary of Labor, substituted as party appellant in place and stead of James P. Mitchell, resigned), Appellant, v. JOHN R. COWLEY & BRO., INC., and Marine Junk Company, Inc., Appellees.

No. 18440.

United States Court of Appeals Fifth Circuit.

June 23, 1961.

Jacob I. Karro, Atty., Dept. of Labor, Bessie Margolin, Asst. Solicitor Dept. of Labor, Harold C. Nystrom, Acting Solicitor of Labor, Washington, D. C., Lawrence P. Hochberg, Atty., U. S. Dept. of Labor, Dallas, Tex., Beverley R. Worrell, Regional Atty., Birmingham, Ala., for appellant.

Alvin McConnell, Arthur J. Kearley, Kearley & McConnell, Mobile, Ala., for appellees.

Before RIVES, JONES and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

This appeal by the Secretary from an adverse judgment in favor of the Employers in a § 16(c), 29 U.S.C.A. § 216(c), suit on behalf of a worker concerns two issues: was the worker an employee rather than an independent contractor? If an employee, was his work as a watchman in a "* * * closely related process or occupation directly essential to the production * * *" of goods for commerce? The Secretary by motions for directed verdict and peremptory instructions challenges the sufficiency of the evidence to sustain the adverse answers to these questions implied by the general verdict in behalf of the Employers.

The work involved is that of a watchman (nighttime and during week-end closing periods) in two adjacent but separate junk yards in Mobile, Alabama separately owned and operated by Cowley¹ and Marine.² A city street, Madison, running east-west separates the two yards. Cowley occupies the whole block to the north. Marine occupies almost all of the block to the south. The yards are fenced and have entrance gates which are locked during closing hours. Each company is engaged in the purchase, receipt, handling, warehousing, storing, sale and distribution of scrap, hides, paper and other materials as well as scrap metals including aluminum, copper, brass, nickel, ferrous and non-ferrous materials. In addition, Cowley purchases, receives, prepares, stores and warehouses at these premises mink and other valuable furs as a part of an extensive trade carried on with furriers in the New York area.

Undisputed evidence affording specific illustration of activities of each fully confirmed the trial stipulations that each was "* * * engaged * * * in the production, sale and distribution of scrap metal, rags, paper, hides and other junk, substantial quantities of which were regularly shipped, delivered, transported, offered for transportation and sold in commerce, as defined by the Act, and shipped, delivered or sold with knowledge that shipment, delivery or sale thereof in commerce was intended from the defendant's said place of business to points outside the State of Alabama." Thus, in one fell swoop, the sometime troublesome questions of interstate destination, Mitchell v. Jaffe, 5 Cir., 1958, 261 F.2d 883, and the employer's knowledge of it, Mitchell v. Raines, 5 Cir., 1956, 238 F.2d 186, were irrevocably answered in favor of basic coverage. There is likewise no dispute that if the activity were within the Act, the hours worked and compensation paid did not meet the statutory standards for minimum wages or overtime.³

The Companies' main defense, successfully asserted below, is that Allen, the worker, was an independent contractor, not an employee. No doubt the formal written contract called him that, but that is only the beginning of the problem, not the answer to it.⁴ Mitchell v. Strickland Transportation Co., 5 Cir., 1955, 228 F.2d 124. The arrangement had its genesis with Allen's predecessor MacPherson. Written contracts identical in terms save for the names of the companies were executed by MacPherson although he was never given a copy of either. When MacPherson quit, identical separate contracts were then made with Allen, the only change being the substitution of his name. The contract stated in effect that the named party (MacPherson, Allen) "is engaged in the business of furnishing plant protection and watchmen services in the City of Mobile, Alabama * * *" and is "desirous of contracting with Cowley, Marine to furnish plant protection and watching services * *." The contract term was for one year to furnish watchman services "for the protection of the property * * * from fire, theft, vandalism, trespass and other hazards." It expressly recognized that watching service could be afforded to others so that continuous presence of a man was not required on the premises although it was stated that the watching service "shall have a watchman patrol such property for said purposes once each hour * * *" during the time the plant is closed. The watching service had an obligation to furnish "in the performance of this contract sufficient reliable and trustworthy personnel and all necessary equipment * * *" for its employees all of whom should "at all times be under the exclusive management * * * and * * * exclusive control * * *" of the watching service.

Quite naturally the companies emphasize the time-worn rubric on right to control the manner and means of work. This was spelled out in the contract and was echoed by management witnesses each of whom denied that anyone had the authority to direct this 72-year-old watchman in the details of the job. But the ultimate indecisiveness of this test — which in an FLSA case is but one of the factors only — is exemplified by translating these words into something meaningful so far as this work is concerned. A watchman watches. A watchman — certainly not a good watchman — would hardly follow a set routine lest his regularity of habit would itself afford to those bent on trespass, pillage or vandalism a safe pattern of operations. So he must deliberately vary his watch if he is to do even a passable job. Then conditions change. The momentary presence of materials of unusual value or susceptibility to loss requires special vigilance. Rendering special vigilance, it is true, relates to a manner or means of an operational detail. But it is the very same sort of judgment that the job inevitably calls for whether it is done by one who is considered an "employee" or "an independent contractor."

This illustrates the wisdom of the approach followed in the FLSA situations which accords unusual significance to the highly specialized nature of the work to be done as a factor in determining whether one called a contractor is really not an employee. If a specific individual regularly performs tasks essentially of a routine nature and that work is a phase of the normal operations of that particular business, the Act will ordinarily regard him as an employee. Mitchell v. Strickland Transportation Co., 5 Cir., 1955, 228 F.2d 124, at page 127; Fahs v. Tree-Gold Co-op. Growers of Florida, 5 Cir., 1948, 166 F.2d 40, at page 44; Rutherford Food Corp. v. McComb, 1947, 331 U.S. 722, at page 729, 67 S.Ct. 1473, at page 1476, 91 L.Ed. 1772.

And this is so even though precisely the same service could be furnished by a contractor through the activities of its personnel. This brings into play another factor of substantial significance: whether the so-called contractor is really engaging in the business as distinguished from performing personal labor. There may be, as we have held, a genuine watchman service. Bowman v. Pace Co., 5 Cir., 1941, 119 F.2d 858. When such is the case the worker performing the task is the employee of the contractor, not an employee of the concern hiring the contractor. That contractor, as the employer in relation to its own employees, may itself become subject to the Act principally because of the nature of the activities of the primary business with whom it has made the contract. Walling v. Sondock, 5 Cir., 1942, 132 F.2d 77, certiorari denied 1943, 318 U.S. 772, 63 S.Ct. 769, 87 L.Ed. 1142; Durkin v. Joyce Agency, Inc., D.C.N.D.Ill.1953, 110 F. Supp. 918, affirmed sub nom. Mitchell v. Joyce Agency, Inc., 1955, 348 U.S. 945, 75 S.Ct. 436, 99 L.Ed. 740.

The solution is, of course, to be found in terms of "the `economic reality' rather than `technical concepts' as the test of employment." Goldberg v. Whitaker House Cooperative, 1961, 81 S.Ct. 933, 936. When done here this record does not supply any of the indicia of a genuinely maintained and operated watchman enterprise followed by the worker Allen as a business as distinguished from personal employment.⁵ To begin with his work as a watchman under the contract, though done mostly at nighttime, was precisely the same activity which he previously performed as an employee for one of these companies. For a year and a half prior to July 1955 (which was during the time of the MacPherson contract) Allen worked for Marine as a watchman on Saturdays and Sundays. He was paid 75¢ an hour as a direct employee. Oddly enough there was an unusual sequel to this which demonstrates as well that there is no substantial difference between the operations of Cowley and Marine. For subsequent to the period included in this suit, Allen worked Saturdays and Sundays for Cowley as a direct employee at $1.00 per hour from December 19, 1956 to March 7, 1957.⁶ Both before and after the contract term, Allen's actual work as an acknowledged employee was the same as that done by him as a contractor. The only difference was the rate and method of compensation and, of course, the title.

It is just as obvious that despite the expressly worded reservation in the contract that Allen was free to furnish such watchman services to others, there was neither any expectation that he would or could do so in sufficient volume to permit earnings that would enable the contractor to comply with the Act. The contracts with Cowley and Marine were executed the same day with each company aware of the other's action. The contracts called for an hourly...