Walling v. Harnischfeger Corporation

• Decision Date: 17 November 1944
• Docket Number: No. 8553.,8553.
• Citation: 145 F.2d 589
• Parties: WALLING, Adm'r of Wage and Hour Div., U. S. Dept. of Labor, v. HARNISCHFEGER CORPORATION.
• Court: U.S. Court of Appeals — Seventh Circuit

145 F.2d 589 (1944)

WALLING, Adm'r of Wage and Hour Div., U. S. Dept. of Labor, v. HARNISCHFEGER CORPORATION.

No. 8553.

Circuit Court of Appeals, Seventh Circuit.

November 17, 1944.

Louis Quarles, Leo Mann, Maxwell H. Herriott, and Thomas W. Korb, all of Milwaukee, Wis., for appellant.

Douglas B. Maggs, Bessie Margolin, and David S. Polier, Department of Labor, all of Washington, D. C., Kenneth P. Montgomery, of Chicago, Ill., and Archibald Cox, Associate Sol., of Washington, D. C., for appellee.

Before EVANS, MAJOR, and MINTON, Circuit Judges.

EVANS, Circuit Judge.

This suit is one to enjoin defendant's alleged violation of the one and one-half overtime provision of the Fair Labor Standards Act of 1938, 29 U.S.C.A. § 201 et seq. The violations were denied by defendant. The court found for plaintiff and permanently enjoined defendant "from violating the provisions of Sections 15(a) (1) and 15(a) (2) of the Fair Labor Standards Act of 1938" in the respects designated. Defendant appealed from this decree.

The facts are free from dispute. There is a mutual concession of good faith between opposing litigants and differences are concededly advanced, honestly. The employees, while not admitting the validity of defendant's contention, are not the complainants. They were represented by the Union, the United Steelworkers of America in all the negotiations. Defendant and its employees are, in other words, in seeming accord over their wage agreement, which they reached amicably and which is the result of their joint successive wage agreement efforts dating back to 1938. In other words, the parties, prior to the passage of the Act in question, began the present incentive wage practice in 1927 and provided for one and a half overtime compensation as far back as 1933.

Generally stated, the controversy is over the correct base upon which defendant must compute its time and a half pay for overtime work. There is no dispute as to the existence or terms of the wage contract which the employees and defendant negotiated. It is in writing and provided for compensations of the employees at a rate higher than the minimum provided for by the Act, and it fixed the hours of service and overtime payments where services exceed the eight hour day and the forty hour week.

Differences arise out of the time and a half payment to a group of employees numbering about 1250 (of the total of 4000) who are defined as "incentive workers." "Incentive workers" are described as piece workers who are employed under an agreement which fixes an hourly rate ranging from 58¢ to $1.08 per hour and also provided for additional pay in case the worker or workers were able to show results better than the time study schedules for the various products. Nearly all (98½%) of these incentive workers have in each pay roll period earned more than their basic or fixed wage because they did their work more speedily than the time study calculations set for the particular task. An interesting chart has been submitted, which shows the amount of incentive pay which the incentive wage earners have received because of their ability to turn out work faster than the estimated time fixed for the doing of the task. This chart shows the incentive pay varies from 2¢ to 29¢ an hour over the basic wage schedule. The amount of the incentive pay of an employee is dependent solely upon his skill and industry. The compensation of an incentive worker may be no more than base rate pay — and but for the contract, might be even less.

The legal controversy is over the application of time and a half pay to these incentive workers. Plaintiff contends that the overtime computations should be upon the basis of the actual wage paid to the incentive worker including incentive pay. The defendant argues that the basic wage rates fixed in the wage agreement are the correct bases for computing the time and a half pay.

The controlling statute reads as follows:

Sec. 7(a) — "No employer shall * * * employ any of his employees * * * for a workweek longer than forty hours * * * unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed."

What was the "regular rate" at which defendant's incentive workers were employed? This is the question for decision.

The employment contract, here involved, provides:

Sec. 3(e) — "As agreed to between the Company and the Union in the last two annual collective bargaining sessions, the parties agree that, for all purposes, the regular rate of pay at which each employee who participates in an incentive plan is employed, is the base rate of each such employee. It is the intention of the Company and the Union that the base rates and piece work rates fixed by this agreement shall remain in effect, and that there shall be no general reductions therefrom during the life of this agreement. However, the Union and the Company recognize that, should adverse economic conditions arise, it may be desirable and necessary, in the interest of employees' security of employment and earnings and the Company's future welfare, to modify the rates hereby established before or at the expiration of this agreement, and it is, therefore, agreed that, should the Company in good faith request such a modification of rates during the life of this agreement, the Union will in good faith enter into collective bargaining negotiations on that request. In consideration thereof the Company agrees that it will not seek such a modification unless the total shop productive hours fall below One Hundred Thirty Thousand (130,000) per month for Three (3) successive months."

The decision in Walling v. Belo Corp., 316 U.S. 624, 62 S.Ct. 1223, 86 L.Ed. 1716, controls the disposition of this appeal. The Belo case and Overnight Motor Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682, were decided the same day. Neither represents the unanimous opinion of the Court. We must assume the majority of the Court found the two opinions were entirely reconcilable.

We see no good reason for not accepting the pronouncement of principle appearing in the Belo opinion and applying it here, even though the facts in that case differ from the one before us. The heart of the decision in the Belo case 316 U.S. 624, 62 S.Ct. 1227, 86 L.Ed. 1716 is to be found in the statement, "It is agreed that as a matter of law employer and employee may establish the `regular rate' by contract."

Nor can we ignore the philosophy back of the final conclusion, which is expressed, thus:

"The problem presented by this case is difficult — difficult because we are asked to provide a rigid definition of `regular rate' when Congress has failed to provide one. Presumably Congress refrained from attempting such definition because the employment relationships to which the Act would apply were so various and unpredictable. And that which it was unwise for Congress to do, this Court should not do. When employer and employees have agreed upon an arrangement which has proven mutually satisfactory, we should not upset it and approve an inflexible and artificial interpretation of the Act which finds no support in its text and which as a practical matter eliminates the possibility of steady income to employees with irregular hours. Where the question is as close as this one, it is well to follow the Congressional lead and to afford the fullest possible scope to agreements among the individuals who are actually affected. This policy is based upon a common sense recognition of the special problems confronting employer and employee in businesses where the work hours fluctuate from week to week and from day to day. Many such employees value the security of a regular weekly income. They want to operate on a family budget, to make commitments for payments on homes and automobiles and insurance. Congress has said nothing to prevent this desirable objective. This Court should not."

Recently decided (November 6, 1944) by the Supreme Court, is the case of Walling, Administrator, v. Helmerich & Payne, Inc., 65 S.Ct. 11, 14, and the opinion there announced sheds further light on the proper application of the overtime wage rate provision of Section 7(a) of the Fair Labor Standards Act of 1938.

As in the Belo case, the Court affirmatively stated what the Act contemplated. We quote from the opinion:

"The Act clearly contemplates the setting of the regular rate in a bona fide manner through wage negotiation between employer and employee, provided that the statutory minimum is respected."

The opinion is largely devoted to showing that the rates fixed in that case...