United States v. Klinghoffer Bros. Realty Corp.

• Decision Date: 05 October 1960
• Docket Number: No. 300,Docket 25692.,300
• Citation: 285 F.2d 487
• Parties: UNITED STATES of America, Appellee, v. KLINGHOFFER BROS. REALTY CORP., Irving Jacobson and Albert Klinghoffer, Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

285 F.2d 487 (1960)

UNITED STATES of America, Appellee, v. KLINGHOFFER BROS. REALTY CORP., Irving Jacobson and Albert Klinghoffer, Defendants-Appellants.

No. 300, Docket 25692.

United States Court of Appeals Second Circuit.

Argued April 12, 1960.

Decided October 5, 1960.

Rehearings Denied January 30, 1961.

COPYRIGHT MATERIAL OMITTED

Sydney Krause, of Krause, Hirsch, Gross & Heilpern, New York City (Alex J. Glauberman, New York City, on the brief), for defendants-appellants.

Elliott Kahaner, Chief Asst. U. S. Atty., E. D. N. Y., Brooklyn, N. Y. (Cornelius W. Wickersham, Jr., U. S. Atty., and Nathan K. Trynin, Asst. U. S. Atty., Brooklyn, N. Y., on the brief; Harold C. Nystrom, Acting Sol. of Labor, Bessie Margolin, Asst. Sol., and Robert E. Nagle, Atty., U. S. Dept. of Labor, Washington, D. C., of counsel on rehearing), for appellee.

Before SWAN, CLARK, and FRIENDLY, Circuit Judges.

CLARK, Circuit Judge.

Defendant Klinghoffer Bros. Realty Corp. and its codefendant officers, Albert Klinghoffer, president, and Irving Jacobson, vice-president, appeal from convictions after trial by jury on three counts of violating the Fair Labor Standards Act, 29 U.S.C. §§ 206(a), 207(a), 211(c), 215(a), 216(a). The prosecution arose from the action of the defendant corporation in requiring four employees to perform additional overtime work for the benefit of a financially embarrassed affiliate, under an arrangement whereby the employees were not compensated for such additional overtime until the affiliate emerged from a bankruptcy proceeding. The jury below found that this arrangement violated the $1.00 minimum wage requirement of 29 U.S.C. § 206 and the overtime provisions of § 207(a), and was accompanied by the keeping of false records in violation of § 211(c).

The factual background. The defendant corporation is one of ten corporations having the same officers and shareholders and constituting the "Rotobroil group," an enterprise generally engaged in the manufacture and sale of electric broilers. On April 7, 1957, four of these companies, following certain financial reverses, filed petitions for arrangement under Chapter XI of the Bankruptcy Act. One of the companies so filing was Jay Kay Metal Specialties Corporation, a manufacturing concern occupying five of six floors in a building at 3408 Northern Boulevard, Queens, as sublessee of the defendant corporation, which was lessee of the entire building. On April 7, 1957, Jay Kay Metal, as an economy measure, terminated the services of a detective agency which had previously been employed to furnish guards for the property at 3408.

To maintain a guard service for that property the defendants then determined to utilize the services of four guards regularly employed by defendant Klinghoffer Bros. Realty Corp. at a nearby building owned and managed by said defendant at 3300 Northern Boulevard. On or about April 12, 1957, defendant Jacobson told the guards that the company's financial embarrassment made it necessary for them to put in some additional work at 3408 without compensation. The guards refused to accede to this, on the ground that it was tantamount to a cut in pay. An understanding was then reached that the guards would put in approximately six additional overtime hours per week at 3408, and that compensation would be forthcoming later on. There is some conflict in the testimony as to the definiteness of this commitment to pay at a future date, but the intention seems to have been that the guards would be paid on termination of the bankruptcy proceedings involving Jay Kay Metal. This arrangement was undertaken with the knowledge and approval of defendant Albert Klinghoffer. The arrangement was terminated about July 30, 1957, because the guards refused to go along with it any further.

For each week during which the arrangement was in effect, the guards turned in time cards showing the amount of straight- and over-time worked at 3300. Each card, after being checked by the supervisor, was forwarded to the payroll department, which issued payroll checks in the name of the corporate defendant on the basis of the number of hours reported. The time worked at 3408 was not marked down on these time cards, and does not seem to have been reported to the defendants until December 1958 — seventeen months after the employment in question. At that time the defendants, who had already been indicted, invited the guards to submit schedules of the hours worked at 3408 and to accept payment therefor by checks issued in the name of Jay Kay Metal. All of the guards accepted this invitation except for guard Conroy, who declined upon the advice of the district attorney. This belated payment was made about a month after the plan of arrangement of Jay Kay Metal in the Chapter XI proceedings was confirmed. Aside from the schedules just referred to, the only record which was kept of the overtime at 3408 was a daily log record maintained by the guards, but which does not appear to have been in the possession of the employer.

Count 1. Count 1 charges that the failure promptly to pay any wage for the additional overtime put in at 3408 violates the $1.00 minimum wage requirement of 29 U.S.C. § 206(a). But no guard received less than $67.20 for a 40-hour week, and no guard worked more than 67 hours. Thus the average weekly wage received by the employee met the requirements of § 206(a). The government argues, nevertheless, that all of such weekly wage was allocated by agreement to the work done at 3300, so that the work at 3408 was performed without pay. Therefore, it is contended, the time worked at 3408 was paid for at a rate of $0.00 per hour, or an amount less than the $1.00 minimum requirement.

If the total wage paid to each guard in this case during any given week is divided by the total time he worked that week, the resulting average hourly wage exceeds $1.00 for every week and every guard involved. We believe this is all that is necessary to meet the requirements of § 206(a). The Congressional purpose underlying that section was to guarantee a minimum livelihood to the employees covered by the Act.¹ Payment at intervals shorter than weekly is unusual and is not necessary to enable the employees to meet their customary obligations. Accordingly the Congressional purpose is accomplished so long as the total weekly wage paid by an employer meets the minimum weekly requirements of the statute, such minimum weekly requirement being equal to the number of hours actually worked that week multiplied by the minimum hourly statutory requirement. Hence so long as this weekly requirement is met, § 206(a) is not violated if the parties by agreement treat all of that wage as being paid for part of the work and regard certain other work as done for nothing. Hence the conviction under Count 1 must be reversed for insufficiency in law, and the indictment under this count is ordered dismissed.

Count 2. Count 2 charges a violation of the requirement of § 207(a) that an employer pay employees such as the guards in this case not less than one and one-half times their regular rate of pay for every hour in excess of forty. 29 U.S.C. § 203(d) defines "employer" to include "any person acting directly or indirectly in the interest of an employer in relation to an employee." The corporate defendant was such an "employer" of the four guards with respect to the overtime at 3408, regardless of whether the actual employer, as that term is used in the law of contracts, was itself or Jay Kay Metal. For the corporate defendant, in making available its own guards to its financially embarrassed affiliate, either employed those guards itself or acted "directly or indirectly in the interest of" Jay Kay Metal, the other possible employer. Accordingly the failure of the corporate defendant to pay promptly the statutory overtime compensation was a violation of 29 U.S.C. § 207(a). The vague deferred compensation plan which appears to have been agreed upon is not sufficient to meet the requirements of that section.

While the FLSA does not expressly set forth a requirement of prompt payment, such a requirement is clearly established by the authorities, and is codified in interpretative regulation, 29 CFR § 777.2 (a), construing 29 U.S.C. §§ 206, 207, to require payment in cash or negotiable instruments payable at par, except as otherwise stated in § 3(m), 29 U.S.C. § 203(m).

In Fleming v. Pearson Hardwood Flooring Co., D.C.E.D.Tenn., 39 F.Supp. 300, defendant employer, in payment of both regular and overtime wages, issued to its employees scrip lacking a regular redemption date and not uniformly negotiable at par. The court held that the minimum wage and overtime compensation prescribed by the FLSA must be paid in cash or by negotiable instruments payable at par, except as otherwise permitted by § 3(m). The scrip issued did not comply with that requirement, and the defendant was held to have violated 29 U.S.C. §§ 206, 207, and 215(a) (2).

The guards in the instant case did not even receive scrip. All they had was a vague understanding that at some indefinite future date, related to the termination of the arrangement proceedings, they would be taken care of. In fact the understanding as to when payment would be made does not seem to have been clearly articulated. At the time the present prosecution was commenced they had been unpaid for approximately a year. Final payment was not made until seventeen months after the rendering of the services in question. Such delayed payment does not meet the requirements of § 207(a).

In Rigopoulos v. Kervan, 2 Cir., 140 F.2d 506, 507, 151 A.L.R. 1126, this Court stated: "Section 7 of the Act, 29 U.S. C.A. § 207, plainly contemplates that overtime compensation shall be paid in the course of employment and not accumulated beyond the regular pay day." There, this Court held that an employer, by making tardy restitution of the amount of overtime compensation due, did not relieve himself...