Schuster v. Highland Supply & Mfg. Co.
| Decision Date | 25 March 1952 |
| Docket Number | 390 |
| Parties | Schuster, etc., et al. v. Highland Supply and Manufacturing Company |
| Court | Pennsylvania Commonwealth Court |
December term, 1950.
Uhl & Uhl, for plaintiffs.
Frank A. Orban, Jr., for defendant.
Trial without jury.
This is an action in assumpsit instituted in a State court, based upon the Fair Labor Standards Act enacted by the Congress of the United States in which plaintiffs seek to recover overtime pay, the liquidated damages for failure to pay same and reasonable counsel fee. By stipulation, the parties waived a jury trial and submitted the issue for trial by the court.
In 1945 defendant, Highland Supply and Manufacturing Company, a Pennsylvania corporation, was organized and began the fabricating of steel oil tanks, most of which were shipped into interstate commerce from its plant in Stonycreek Township, Somerset County, Pa. Frank A. Duerr, the principal entrepreneur, was the controlling stockholder and treasurer of the company. During the period beginning March 29, 1948, and continuing through March 29, 1950, approximately 15 men were employed on various dates by the corporation, including the following six plaintiffs: Harry H. Schuster, Ralph E. Montgomery, Clyde B. Lambert, Ray W. Gohn, Harold E. Rexroth and James Gohn; the seventh named plaintiff, Tony F. Gasperine, was not employed during the stated period and his alleged claim has been abandoned. Three of the six plaintiffs were paid straight time at the rate of $ 1.30 per hour and the other three straight time at the rate of $ 1.40 per hour in accordance with their verbal agreement of employment with the company. Although all six plaintiffs worked more than 40 hours during certain weeks of their employment in the period above stated, none of them were paid time and half time rate for overtime work, although the payroll records were set up to show the amount of overtime hours worked. Neither of the plaintiffs, prior to this action, requested payment for overtime work at the overtime rate. Each employee was regularly furnished a pay statement showing the number of hours worked and the total amount of wages earned based on the fixed hourly rate. These plaintiffs made their original complaints to the Department of Labor. Not until a representative of the Wage and Hour Administration of the Department of Labor informed the officials of this corporation did these officials know that the several employees were entitled to overtime pay for overtime labor. The payroll records were not intentionally falsified nor were duplicate sets of payroll records made or kept. Defendant corporation complied with the directions of the Department of Labor as to the submission of its payroll records and, after investigation and direction by the department, the employer tendered each employee a check for the amount of overtime as determined by the Federal Government agency. All of the employees thus tendered overtime pay accepted their checks save six plaintiffs, who refused to accept the check unless it included payment of the overtime pay, together with an equal amount as liquidated damages.
From the foregoing facts it is manifest, and defendant concedes, that it was engaged in interstate commerce; consequently, the Fair Labor Standards Act of June 25, 1938, 52 Stat. at L. 1060, 29 U.S.C. § 201, as amended, is applicable to defendant corporation.
Section 7 of the act, 29 U.S.C. § 207, subtitled " Maximum Hours", provides inter alia:
None of the exceptions mentioned in the section are applicable to the instant case; obviously, therefore, defendant was required to pay these plaintiff employees at the overtime rate for all hours exceeding 40 that they worked during any work week.
Section 16 of the act, 29 U.S.C. § 216, sets forth the civil and criminal liabilities and penalties for any breach of the act, the pertinent portion of the section being as follows:
Defendant corporation having failed to comply with the act of Congress requiring the payment of overtime rate for overtime labor, is civilly liable as provided in the act (Divine v. Levy, 45 F.Supp. 49), and these six plaintiffs are proper parties to institute this action: Colan v. Wecksler, 45 F.Supp. 508, Smith v. Continental Oil Co., 59 F.Supp. 91. This court has jurisdiction of both the parties and the subject of the action: Adams v. Long, 65 F.Supp. 310; Mizrahi v. Pandora Frocks, Inc., 86 F.Supp. 958. In construing this section of this act of Congress, decisions of the United States Supreme Court are binding on the State courts and decisions of the lower Federal courts are persuasive and generally followed unless a conflct requires a choice between one or more announced interpretations; Skelly Oil Co. v. Jackson, 194 Okla. 183, 148 P.2d 182; Hitchcock v. Union & New Haven Trust Co., 134 Conn. 246, 56 A.2d 655.
An examination of the decisions of the Federal courts construing and applying the penalty section of the act from the time of its passage until the amendatory Act of 1947, familiarly known as the Portal-to-Portal Pay Act, discloses that the liquidated damages provision of the penalty section was mandatory and the courts were obliged to recognize and enforce that penalty (Cassone v. Wm. Edgar John & Associates, 57 N.Y.S.2d 169 (1945); Wilson Oil Company v. Hardy, 49 N.M. 337, 164 P.2d 209 (1945)); until the amendment of 1947 the good faith of the employer was immaterial and not a defense (Rigopoulos et al. v. Kervan, 140 F.2d 506; Overnight Motor Transport Co. v. Missel, 316 U.S. 572; Barrineau v. Carolina Milling Co., 52 F.Supp. 197 (1943)); the legion of cases cited in the several notes to 29 U.S.C. § 216 discloses the strictness and uniformity of the mandatory liabilities as applied and enforced by both the courts and the appropriate administrative agencies.
The harshness of various provisions of the Fair Labor Standards Act as interpreted and applied by the courts came to the attention of the Congress in 1947, resulting in the passage of the " Portal-to-Portal Pay" amendment to the Fair Labor Standards Act and other labor acts: 29 U.S.C. § 251. The reasons for the adoption of the 1947 amendment, as well as the results desired therefrom, appear in section 1 and may be summarized as follows: Avoiding financial ruin of many employers, impairment of employers' credit, inequalities of competitive conditions in industry, that " (4) employees would receive windfall payments, including liquidated damages of sums for activities performed by them without any expectation of reward beyond that included in their agreed rates of pay," compensation demands for activities not contemplated in the employment, industrial disputes, burdens upon the courts with needless litigation, deprivation of revenue in the public treasury, increased costs to the government for goods and services and, finally, adverse effects upon the various governmental revenues: 29 U.S.C. § 251.
Accordingly, the 1947 amendment included three specific sections to alleviate the stringency of the section of the 1938 act here concerned by creating in section 9, 29 U.S.C. § 258, a defense to the liquidated damages liability for failure to pay overtime rates for overtime labor if the omission occurred in reliance upon past administrative rulings when such omission was properly pleaded and proven, and, similarly in section 10, 29 U.S.C. § 259, if the omission occurs in reliance upon future administrative rulings as qualified and provided in the sections indicated. The third section of the 1947 amendment for relief from the stringent interpretation and application of the liquidated damages provision of the parent act is section 11, 29 U.S.C. § 260, and is as follows:
" In any action commenced prior to or on or after May 14, 1947 to recover unpaid minimum wages, unpaid overtime compensation, or liquidated damages, under the Fair Labor Standards Act of 1938, as amended...
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