Walling v. Belo Corporation, 622

• Court: United States Supreme Court
• Writing for the Court: BYRNES
• Citation: 316 U.S. 624,86 L.Ed. 1716,62 S.Ct. 1223
• Parties: WALLING, Adm'r of the Wage and Hour Division, U.S. Department of Labor, v. A. H. BELO CORPORATION
• Docket Number: No. 622,622
• Decision Date: 08 June 1942

316 U.S. 624 62 S.Ct. 1223 86 L.Ed. 1716 WALLING, Adm'r of the Wage and Hour Division, U.S. Department of Labor,

v.

A. H. BELO CORPORATION.

No. 622. Argued April 6, 1942. Decided June 8, 1942.

Page 625

Mr. Charles Fahy, Sol. Gen., of Washington, D.C., for petitioner.

Mr. Maurice E. Purnell, of Dallas, Tex., for respondent.

Mr. Justice BYRNES delivered the opinion of the Court.

This is a proceeding by the Administrator of the Wage and Hour Division of the Department of Labor to restrain the respondent corporation from alleged violation of the

Page 626

Fair Labor Standards Act.¹ The Administrator sought to prevent the use by respondent under certain contracts with its employees of wage agreements deemed by the Administrator violative of the time and a half for overtime provisions of section 7(a)² as implemented by section 15(a)(1) and (2).³

Page 627

The respondent, a Texas corporation, is the publisher of the Dallas Morning News and other periodicals, and the owner and operator of radio station WFAA. It has some 600 employees. Those in the mechanical departments work under a collective bargaining agreement and are not involved in the present dispute. The others, and particularly those in the newspaper business, work irregular hours. Prior to the effective date of the Act, October 24, 1938, respondent had been paying all but two or three of these employees more than the minimum wage required by the Act. They received vacations of approximately two weeks each year at full pay; special bonuses at the end of the year amounting to approximately one week's earnings; and full pay during periods of illness, sometimes continuing for weeks and sometimes for months. At the time of the trial 28 superannuated employees were carried on the payroll at full rates of pay. Employees were permitted absences to attend to personal affairs without deductions from pay. When they were required to work long hours in any week, they were given compensating time off in succeeding weeks. Life insurance was carried for them at respondent's expense.

After the enactment of the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., but before its effective date, respondent endeavored to adjust its compensation system to meet the requirements of the Act by negotiating a contract with each of its employees except those in the mechanical departments. These contracts were in the form of letters stating terms which were agreed to by the employees. The following is a typical letter:

Page 628

'The Fair Labor Standards Act which goes into effect on October 24, 1938, provides for the following minimum wages and maximum hours of employment:

'First year—25¢ per hour minimum 44 hours maximum per week

'Second year—30¢ per hour minimum 42 hours maximum per week

'Third year—40¢ per hour minimum⁴ 40 hours maximum per week

except that employees may work more than the number of hours specified above, provided that overtime rates shall be a minimum of one and one-half times the basic rate.

'In order to conform our employment arrangements to the scheme of the Act without reducing the amount of money which you receive each week, we advise that from and after October 24, 1938, your basic rate of pay will be ..... 67 ..... cents per hour for the first forty-four hours each week, and that for time over forty-four hours each week you will receive for each hour of work not less than one and one-half time such basic rate above mentioned, with a guaranty on our part that you shall receive weekly, for regular time and for such overtime as the necessities of the business may demand, a sum not less than ..... $40 ......'

In most cases, as in this example, the specified hourly rate was fixed at 1/60th of the guaranteed weekly wage. The result was that during the first year under the Act when the statutory maximum of regular hours was 44, the employee was required to work 54 1/2 hours before he became entitled to any pay in addition to the weekly guaranty.⁵

Page 629

When the employee worked enough hours at the contract rate to earn more than the guaranty, the surplus time was paid for at the rate of 150% of the hourly contract wage. If the employee received an increase in pay, the hourly rate and weekly rate were readjusted.

For eighteen months the system embodied in these contracts was followed to the apparent satisfaction of employer and employees. Respondent was then advised that the arrangement was in violation of the Act and that it was liable to its employees in an amount of from 30 to 60 thousand dollars. It was informed by the regional director in Dallas and by an official in the Administrator's office in Washington that an employee's complaint had precipitated the investigation. These officials declined to give the name of the employee.

Respondent thereupon brought suit for a declaratory judgment in the District Court for the Northern District of Texas joining the regional director and three of its employees as defendants. The defendant employees answered that they and all the other employees affected by the system approved of it. The regional director moved to dismiss on two grounds, one of which was that he represented none of the employees. The motion to dismiss was denied. A. H. Belo Corporation v. Street, D.C., 35 F.Supp. 430. In the meantime petitioner instituted this suit to enjoin respondent from continuing to operate the wage system based upon its contracts with its employees. The two suits were consolidated and tried together. The District Court entered a declaratory judgment for the respondent and dismissed the bill for an injunction. 36 F.Supp. 907.

Petitioner appealed to the Circuit Court of Appeals from the dismissal of its complaint. That Court affirmed the judgment of the District Court. Fleming v. A. H. Belo Corporation, 5 Cir., 121 F.2d 207, 210. It found that the contracts were 'actual bona fide contracts of employment' and that 'they were intended to, and did, really fix the regular rates at which each employee was

Page 630

employed.' We granted certiorari because of the importance of the question in the administration of the Act. 314 U.S. 601, 62 S.Ct. 137, 86 L.Ed. —-.

It is no doubt true, as petitioner contends, that the purpose of respondent's arrangement with its employees was to permit as far as possible the payment of the same total weekly wage after the Act as before. But nothing in the Act bars an employer from contracting with his employees to pay them the same wages that they received previously, so long as the new rate equals or exceeds the minimum required by the Act.⁶

The Act requires that for each hour of work beyond the statutory maximum the employees must be paid 'not less than one and one-half times the regular rate at which he is employed.' This case turns upon the meaning of the words 'the regular rate at which he is employed.' Re-

Page 631

spondent contends that the regular rate under the illustrative contract, which is set out above and to which we shall refer throughout, is 67 cents an hour. Petitioner argues, however, that the 67 cents hourly rate mentioned in the contract is meaningless and that the agreement is in effect for a weekly salary of $40 without regard to fluctuations in the number of hours worked each week. Treating the contract as one for a fixed weekly salary, he urges that the regular hourly rate for any single week is the quotient of the $40 guaranty divided by the number of hours actually worked in that week.⁷ Under this formula the employee is entitled to the regular hourly rate thus determined for the first 44 hours⁸ each week and to not less than one and one-half times that rate for each hour thereafter.

In its initial stage the question to which this dispute gives rise is a question of law, a question of interpretation of the statutory term 'regular rate'. But it is agreed that as a matter of law employer and employee may establish the 'regular rate' by contract. In the case before us such an effort has been made, and in the example given the regular rate has been specified as 67 cents an hour. The difficulty arises from the inclusion of the $40 guaranty. The problem is whether the intention of the parties to set 67 cents an hour as the regular rate squares with their intention to guarantee a weekly income of $40. The Administrator's position is that these two objectives are inherently inconsistent and that the intention to fix the regular hourly rate at 67 cents is overridden by the intention to guarantee the $40 per week.

We cannot agree. In the first place, when an employee works more than 54 1/2 hours in a single week, he is admittedly entitled to more than the $40 guarantee. The record

Page 632

shows that in such a case, the employee is paid at the rate of $1.00 an hour (150% $.67) for each hour of overtime. In this situation, then, it is clearly the guaranty that becomes inoperative and the 67 cent hourly rate fixed by the contract that is controlling.

In the second place, although it is perfectly true that when the employee works less than 54 1/2 hours during the week his pay is determined by the $40 guaranty, it does not dispose of the problem simply to say this. The question remains whether the $40 contemplates compensation for overtime as well as basic pay. The contract says that the employee is to receive 67 cents an hour for the first 44 hours and 'not less than one and one-half time such basic rate' for each hour over 44. Consequently, if an employee works 50 hours in a given week, it might reasonably be said that his $40 wage consists of $29.48 for the first 44 hour (44 $.67) plus $10.52 for the remaining six hours (6 $1.753). To be sure, $1.753 is more than 150% of $.67. But the Act does not prohibit paying more; it requires only that the overtime rate be 'not less than' 150% of the basic rate. It is also true that under this formula the overtime rate per hour may vary from week to week. But nothing in the Act...