Walling v. Alaska Pacific Consol. Min. Co.

• Decision Date: 19 December 1945
• Docket Number: No. 10905.,10905.
• Citation: 152 F.2d 812
• Parties: WALLING, Adm'r of Wage and Hour Division, U. S. Dept. of Labor, v. ALASKA PACIFIC CONSOL. MIN. CO.
• Court: U.S. Court of Appeals — Ninth Circuit

152 F.2d 812 (1945)

WALLING, Adm'r of Wage and Hour Division, U. S. Dept. of Labor, v. ALASKA PACIFIC CONSOL. MIN. CO.

No. 10905.

Circuit Court of Appeals, Ninth Circuit.

December 19, 1945.

Douglas B. Maggs, Sol., U. S. Dept. of Labor, Wage & Hr. Div., and Bessie Margolin, Asst. Sol., both of Washington, D. C., Dorothy M. Williams, Regional Atty., and Joseph M. Stone, Atty., both of San Francisco, Cal., for appellant.

James R. Gates and V. A. Montgomery, both of Seattle, Wash., for appellee.

Before DENMAN, BONE, and ORR, Circuit Judges.

ORR, Circuit Judge.

At the time the Fair Labor Standards Act of 1938¹ became effective, appellee, hereinafter referred to as the Company, put in operation a so-called split shift plan. Appellant, hereinafter referred to as the Administrator, challenging the legality of said plan, brought an action in the District Court seeking to enjoin the Company from operating thereunder. The injunction was refused and the Administrator appeals.

The Company, as its name implies, was engaged in the mining business. It operated a gold mine in the Talkeetna Mountains, 70 miles from Anchorage, Alaska. It is admitted that the employees of the Company are covered by the Fair Labor Standards Act.

Prior to the effective date of the Act the Company employed some of its employees on a daily, or shift, basis and some on a monthly basis. The regular day, or shift, was eight hours. If and when an employee worked more than eight hours he was paid overtime, usually at straight time. In the event a shift of less than eight hours was worked a proportionate deduction was made. Men other than those employed on a daily, or shift, basis were employed on a monthly basis at a definite sum; they were to perform seven 8-hour shifts in a week; if they performed any overtime, they received overtime at straight time, figured on the basis of the regular time.

At the time of the effective date of the Act the Company had considerable concern as to how they could best comply with the requirements of the Act. They were operating in an isolated section. The employees were desirous of working a sufficient time each day to maintain the daily and monthly wages theretofore received. Conditions at the mine made it imperative that operations be carried on for seven days a week. The Company well knew that should the hourly wage be fixed so as to reduce the daily wage each man had been receiving that discontent would exist among the men and it is not unlikely that they would have walked off the job. The men were interested in the amount received per shift. To divide the amount then paid for the eight hour day and to fix one-eighth thereof as the hourly wage would result in greatly increased cost of operations. As an example we may take a miner who, prior to the effective date of the Act, was receiving $5 for an eight hour shift. To divide that amount on an hourly basis would be 62½ cents per hour. If paid on that basis for the first 40 hours he would receive $25; for the remaining 16 hours he would receive time and one-half as overtime, or 93¾ cents per hour; hence, for the 56 hour week which was the usual practice the Company would be compelled to pay $40.10 in place of $35.00, the weekly earning on a straight shift basis. Of course the Company did not desire to grant this increase in wages. The men were satisfied with the wages they were receiving under the daily eight-hour shift and monthly plans in operation before the effective date of the Act. The Company, in order to maintain the status quo, devised and put in operation its so-called 6-2 plan. The eight-hour shift was divided into 6 hours straight time at a given amount per hour and the remaining two hours were considered overtime. Thus, in each week of seven days the employee worked so-called 42 hours straight time and 14 hours overtime for the same wage he had received before the Act went into effect. An elaborate algebraic formula was devised in order to create this plan. However, the results obtained were those above outlined. The normal work day was not reduced; the amount paid per day and per month remained the same.

The Company provided board and lodging to the men living at the property and an amount equal thereto was paid to employees living off the property.

During part of 1941 the Company hired approximately 20 men to drive a tunnel known as the "water tunnel". These men were paid a guaranteed daily wage of $10, plus a production bonus at a specified rate per foot in excess of a 15-foot daily average. The $10 daily payments were split on the Company's books into "regular" and "overtime" hourly rates, apparently chosen at random and designed, when added together, for six hours "regular time" and two hours "overtime" to equal $10 per day. The tunnel was completed in 1941, prior to the institution of the instant suit and this compensation system was not used thereafter.

In 1942 additional tunnel construction was begun and paid for on a piece work basis at an agreed sum per foot. This work resulted in average daily earnings of $15 per man. In their contracts with the Company for this project the men agreed, and the Company guaranteed, that their base pay was to be at least 40 cents an hour for 40 regular hours and 60 cents an hour for 16 overtime hours, but that they should have as much more than that as they were able to earn. The men were limited to 56 hours work per week.

These employees received board and lodging in addition to their cash earnings. Shortly before this action was begun the Company made specific agreements with each employee that instead of being considered additional overtime as in the past the board furnished should be charged against their weekly earnings.

The lower court did not rule on the validity of the system of compensating employees engaged in the water tunnel construction since it found the tunnel was completed before this action began and that that compensation system was not thereafter used. The lower court also failed to rule on whether the cost of board and lodging furnished by the Company to employees must be included in determining their regular rates of pay.

Since the District Court's decision, the Supreme Court has declared a "split day" plan virtually identical to the one under consideration here (there the division was 4-4, here it was 6-2) to be a violation of Section 7 of the Act, 29 U.S.C.A. § 207.² The Supreme Court, in condemning the "split day" plan stated that the words "regular rate" as used in the Act mean the hourly rate actually paid for the normal non-overtime workweek. The vice in the Company's plan, as in the plan condemned by the Helmerich case,³ was that it did not base the regular rate upon the wages received, nor upon the hours actually spent in the normal non-overtime week, nor was the regular rate paid for the first forty hours actually worked. The Company's "regular" rate was derived "not from the actual hours and wages but from ingenious mathematical manipulations, with the sole purpose being to perpetuate the pre-statutory wage scale."⁴

The lower court relied upon the decision in the Helmerich case as decided by the Tenth Circuit Court of Appeals,⁵ which was reversed by the Supreme Court,⁶ and on Walling v. A. H. Belo Corporation, 316 U.S. 624, 62 S.Ct. 1223, 86 L.Ed. 1716. The Supreme Court distinguished the Helmerich case from the Belo case on the ground that in the Belo case the question of the applicability of the regular rate to the first forty hours actually and regularly worked was not involved. There is language in the Belo case which would support the Company's contentions, but, as the Seventh Circuit Court of Appeals said recently in Walling v. Uhlmann Grain Company, 151 F.2d 381, 383:

"If the Supreme Court has not repudiated...