Mitchell v. Nutter

• Citation: 161 F. Supp. 799
• Decision Date: 28 April 1958
• Docket Number: Civ. No. 1039.
• Parties: James P. MITCHELL, Secretary of Labor, United States Department of Labor v. Pearl L. NUTTER.
• Court: U.S. District Court — District of Maine

161 F. Supp. 799

James P. MITCHELL, Secretary of Labor, United States Department of Labor v. Pearl L. NUTTER.

Civ. No. 1039.

United States District Court D. Maine, N. D.

April 28, 1958.

Thomas L. Thistle, Regional Atty., U. S. Dept. of Labor, Wage & Hour

Divn., Robert J. Nye, Boston, Mass., for plaintiff.

David A. Nichols, Camden, Me., for defendant.

GIGNOUX, District Judge.

This is an action brought by the Secretary of Labor under the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.A. § 201 et seq., to permanently enjoin defendant, a distributor of infants' knitted outerwear, from violating the provisions of the Act. Jurisdiction is conferred by § 17 of the Act. 29 U.S. C.A. § 217.

The complaint, filed August 13, 1957, as amended November 6, 1957, alleges violation by defendant of the provisions of §§ 15(a) (1), 15(a) (2), and 15(a) (5) of the Act, in paying wages to approximately 150 women (hereinafter descriptively called homeworkers) producing infants' knitted and crocheted outerwear which is sold by defendant in interstate commerce, at rates less than the minimum wage rates established by § 6 of the Act; and in failing to keep certain records, and to obtain special homework certificates with respect to such homeworkers as required by the regulations issued by the Administrator of the Wage and Hour Division, Department of Labor, under §§ 11(c) and 11(d) of the Act.¹

At a pre-trial conference on November 6, 1957, it was conceded by defendant that the workers are engaged in the production of goods for interstate commerce and that, with respect to these workers, she has violated the minimum wage, record keeping, and homework certificate provisions of the Act, if the Act is applicable. It was further stipulated by the parties that the only issues for determination by this Court are whether the homeworkers producing the infants' knitted and crocheted outerwear sold by defendant are "employees" of defendant within the meaning of the Act and "industrial homeworkers" within the meaning of the applicable regulation. Defendant agrees that if these homeworkers are "employees" and "industrial homeworkers," she has violated the Act and the injunction must issue.

Evidence upon the issues as thus limited was heard by the Court on February 5 and 6, 1958. Extensive briefs were submitted by the parties on March 7, 1958, and reply briefs were filed on March 21, 1958.

The facts concerning defendant's business and her relationship to the homeworkers involved are as follows:

Since prior to November 20, 1954, defendant has been engaged at Troy, Maine, in the business of handling, selling and distributing handmade infants' knitted and crocheted outerwear, viz., bonnets, booties, sacques and sets consisting of all three items. The infants' outerwear handled by defendant is obtained by her from approximately 150 ladies, who either knit or crochet the garments from wool or orlon yarn. All the ladies do their work in their homes, most of which are on farms in the vicinity of Troy, and usually mail the finished garments to defendant when they have exhausted the supply of yarn they have on hand. Defendant exercises no direct supervision or control over the manner in which, or the time when, their work is performed. The ladies regard their work as "pick up" or spare-time work. The amount of business done by any one lady with defendant is small and depends upon the amount of spare time she has available from her normal household or farm duties. Defendant sets the prices which she pays for the finished garments on a piece-rate basis. Payment has been prompt, by check, and confirmed by a small card indicating the price paid, less the cost of yarn furnished by defendant, and the State of Maine sales tax deducted therefrom. It has been defendant's practice voluntarily to raise the prices paid by her when the cost of yarn has increased.

Until shortly before the trial of this case, the ladies obtained their yarn directly from defendant. It was the practice for them to order the yarn from defendant, who charged the cost against their accounts and deducted it from the price of the finished items when they were mailed in. Following the filing of the complaint in the instant action, and approximately two months before the trial, defendant notified the ladies that she would no longer be furnishing the yarn and that they could purchase yarn in the future from defendant's sister in East Corinth, Maine.

In many instances, defendant has supplied the ladies with samples of the work she desires. In other instances, the ladies have followed patterns obtained by them from magazines or other sources, but in such cases defendant's approval of the pattern to be used has been obtained. Defendant has not hesitated to suggest changes in a particular lady's work, such as the use of a different size needle or hook, a tighter or looser stitch, and sometimes the color of trim to be used, and the ladies have complied with these suggestions if they were able. Defendant is at all times free to reject any proffered work, but none has ever been rejected by her.

The ladies who deal with defendant have only a nominal investment, never exceeding $10, in equipment and materials, which consist solely of knitting needles or crochet hooks and the yarn. The ladies do not keep books or records, advertise, carry a line of samples or pictures of their work, have business stationery or cards, maintain an inventory, guarantee delivery at specified times, or have employees working for them. No one of them has ever sustained or expects to sustain a loss in connection with her work. All state that they enjoy their relationship with defendant and wish it to continue. Most of them have sent their goods exclusively to defendant since they first began dealing with her, although some have knitted or crocheted garments for persons other than defendant, including in one instance some retail stores. Further, the ladies consistently testified that they regard the yarn they utilize as their own, that they do not decide to whom they will dispose of the finished garments until they have finished working on them and that defendant is under no obligation to accept finished garments shipped by them.

At her place of business in Troy, defendant employs one helper to add ribbon or embroidery to the garments received by her from the homeworkers, to assemble the garments in sets, and to package and ship the garments to her retail outlets. Defendant also maintains an inventory of goods, which varies in amount from season to season, keeps complete books and records, and engages a commission broker to sell the garments. Defendant concedes that the homeworkers are an essential part of her business.

As indicated, the issues reserved for determination by this Court are whether defendant's homeworkers are "employees" within the meaning of the Act and "industrial homeworkers" within the meaning of the applicable regulation.² On the foregoing facts it is clear that these homeworkers are industrial homeworkers as defined in the regulation if they are "employees" of defendant within the meaning of the Act, since the regulation incorporates the statutory definition and is otherwise conceded to be applicable to the operations of defendant's homeworkers.³ The only substantial issue before this Court, therefore, is whether these homeworkers are "employees" of defendant within the meaning of the Act itself.

Since the decision of the Supreme Court in N.L.R.B. v. Hearst Publications, Inc., 1944, 322 U.S. 111, 128-129, 64 S.Ct. 851, 88 L.Ed. 1170, it has been settled that the test to be applied in the determination of the question here at issue is not the traditional test of the master-servant relationship under the common law, but whether or not these homeworkers are employees in the light of the history, terms and purposes of the Fair Labor Standards Act. Walling v. American Needlecrafts, Inc., 6 Cir., 1943, 139 F.2d 60, 63. See Walling v. Portland Terminal Co., 1947, 330 U.S. 148, 150-151, 67 S.Ct. 639, 91 L.Ed. 809; Rutherford Food Corp. v. McComb, 1947, 331 U.S. 722, 729, 67 S.Ct. 1473, 91 L.Ed. 1772. And in determining that question the test is whether as a matter of "economic reality" a worker is an employee within the meaning of the Act itself, and not whether he is a servant according to the "technical concepts pertinent to an employer's legal responsibility to third persons for acts of his servants." United States v. Silk, 1947, 331 U.S. 704, 713, 67 S.Ct. 1463, 1468, 91 L.Ed. 1757.

As stated by the Supreme Court in United States v. Darby, 1941, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609, the purposes of the Fair Labor Standards Act, as set forth in the declaration of policy contained in § 2(a), are "to exclude from interstate commerce goods produced * * * under conditions detrimental to the maintenance of the minimum standards of living necessary for health and general well-being" (312 U.S. at page 109, 61 S.Ct. at page 455) and "to make effective the Congressional * * * policy that interstate commerce should not be made the instrument of competition in the distribution of goods produced under substandard labor conditions" (312 U.S. at page 115, 61 S.Ct. at page 457). Such being the purposes of the statute, its terms and history must be examined to determine whether Congress intended to permit the interstate shipment of goods produced under substandard labor conditions in a home, when such goods would be excluded from interstate commerce if produced in a factory. McComb v. Homeworkers' Handicraft Cooperative, 4 Cir., 1949, 176 F.2d 633, 636.

The Act itself in § 3(e) defines "employee" as "any individual employed by an employer." 29 U.S.C.A. § 203(e). And "employ" is defined in § 3(g) as including "to suffer or permit to work." 29 U.S.C.A. § 203(g). At the time the Act was passed, Senator (now Mr. Justice) Black described this language as "the broadest definition that has ever been...