Bay Ridge Operating Co., Inc. v. Aaron
334 U.S. 446 (1948)

Annotate this Case

U.S. Supreme Court

Bay Ridge Operating Co., Inc. v. Aaron, 334 U.S. 446 (1948)

Bay Ridge Operating Co., Inc. v. Aaron

No. 366

Argued January 12, 1948

Decided June 7, 1948*

334 U.S. 446

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

A collective bargaining agreement between a longshoremen's union and employers, affecting employment in interstate and foreign commerce, provided for "straight time" hourly rates for work done during certain daytime hours on weekdays and "overtime rates," approximately 150% of "straight time" rates, for work done during all other hours and on Sundays and holidays. It made no provision for a differential in pay for work in excess of 40 hours per week. Longshoremen work irregular hours, and frequently work for several different employers during a single week. Respondent longshoremen, some of whom had worked only outside "straight time" periods and had been paid "overtime rates," sued to recover additional overtime compensation allegedly due them under the Fair Labor Standards Act for work in excess of 40 hours per week.

Held:

1. The "straight time" rate provided for by the agreement does not constitute the "regular rate" which § 7(a) of the Fair Labor Standards Act requires to be used in computing the statutory minimum payment ("not less than one and one-half times the regular rate") for work in excess of 40 hours. Pp. 334 U. S. 459-477.

2. Walling v. Belo Corp.,316 U. S. 624, distinguished. Pp. 334 U. S. 462-463.

3. Contract declarations, even though the result of collective bargaining, are not conclusive as to what is the "regular rate" within the meaning of § 7(a). Pp. 334 U. S. 463-464.

4. Determination of the "regular rate" for each individual must be drawn from what happens under the employment contract. P. 334 U. S. 464.

5. The "regular rate" is to be found by dividing the number of hours worked into the total weekly compensation received, less the amount of any "overtime premium." Pp. 334 U. S. 464-465.

6. "Overtime premium," deductible from total compensation received in computing the "regular rate," is any additional sum

Page 334 U. S. 447

received by an employee for work because of previous work for a specified number of hours in the workweek or workday, whether the hours are specified by contract or statute. Pp. 450, n 3, 334 U. S. 465-471.

7. Where an employee receives a higher wage or rate because of undesirable hours or disagreeable work, such wage represents a shift differential, rather than an overtime premium, and must enter into the determination of the "regular rate" of pay. The extra pay provided in "overtime" rates under the agreement in this case represents a shift differential, and not an overtime premium. Pp. 334 U. S. 466-471.

8. The fact that the contract "overtime" rates were designed to concentrate the work of the longshoremen in the straight time hours is irrelevant to the determination of the respondents' "regular rate" of pay. P. 334 U. S. 470.

9. The purpose of the overtime compensation requirement of § 7(a) is not only to spread employment, but also to compensate an employee in a specific manner for the strain of working longer than 40 hours. P. 334 U. S. 470.

10. It is unnecessary in this case to determine what were respondents' "regular working hours," since regular working hours under a contract, even for an individual, have no significance in determining the rate of pay under the statute. Pp. 334 U. S. 471-474.

11. Since the so-called "overtime" rates paid under the contract in this case actually represented a shift differential, and had no relation to the number of hours previously worked during the week, their payment did not meet the requirements of § 7 of the Fair Labor Standards Act. Pp. 334 U. S. 474-476.

12. Each respondent is entitled to receive compensation for his hours worked in excess of 40 at 1 1/2 times his regular rate, computed as the weighted average of the rates worked during the week. P. 334 U. S. 476.

13. In computing the amount to be paid, the employer may credit against the obligation to pay statutory excess compensation the amount already paid to each respondent which is allocable to work in those excess hours. The precise method of computing this credit and finding the exact amount due respondents is left to the District Court on remand. Pp. 334 U. S. 476-477.

14. On remand, the District Court may consider any defense which the employers may have under the Portal-to-Portal Act, and may allow any amendments to the complaint or answer or any further evidence which the court may deem just. P. 334 U. S. 477.

162 F.2d 665 modified and affirmed.

Page 334 U. S. 448

Respondents sued petitioners to recover unpaid overtime compensation allegedly due under the Fair Labor Standards Act. To the extent that the judgment of the District Court was adverse, 69 F.Supp. 956, respondents appealed, and the Circuit Court of Appeals reversed. 162 F.2d 665. This Court granted certiorari. 332 U.S. 814. Modified and affirmed, p. 334 U. S. 477.

MR. JUSTICE REED delivered the opinion of the Court.

These cases present another aspect of the perplexing problem of what constitutes the regular rate of pay which the Fair Labor Standards Act requires to be used in computing the proper payment for work in excess of forty hours. The applicable provisions read as follows:

"Sec. 7. (a) No employer shall, except as otherwise provided in this section, employ any of his

Page 334 U. S. 449

employees who is engaged in commerce or in the production of goods for commerce --"

"* * * *"

" (3) for a workweek longer than forty hours after the expiration of the second year from such date,"

"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. [Footnote 1]"

The problem posed is the method of computing the regular rate of pay for longshoremen who work in foreign and interstate commerce varying and irregular hours throughout the workweek under a collective bargaining agreement for handling cargo which provides contract straight time hourly rates for work done within a prescribed 44-hour time schedule and contract overtime rates for all work done outside the straight time hours. [Footnote 2]

These two suits were brought as class actions on behalf of all longshoremen employed by two stevedoring companies, Bay Ridge Operating Co., and Huron Stevedoring

Page 334 U. S. 450

Corp., to recover unpaid statutory excess compensation [Footnote 3] in accordance with § 16(b) of the Fair Labor Standards Act. [Footnote 4] By stipulation, the claims of ten specific longshoremen in each case were severed and the two suits were consolidated for trial, leaving the claims of the other plaintiffs pending on the docket. The claims of the plaintiffs here are for the period October 1, 1943, to September 30, 1945.

Page 334 U. S. 451

The terms of employment for the respondents, longshoremen working in the Port of New York, were fixed for the period in question by the collective bargaining agreement between the International Longshoremens Association and the New York Shipping Association, together with certain steamship and stevedore companies. It was applicable to the two petitioners. The agreement established a "basic working day" of eight hours and a "basic working week," that is, workweek, of forty-four hours; hourly rates for different types of cargo were specified for work between 8 a.m. and 12 noon and between 1 p.m. and 5 p.m. during five working days of the week, Monday through Friday, and from 8 a.m. to 12 noon on Saturday, and a different schedule of rates for work during all other hours in the workweek. The first schedule was called "straight time" rates, and the second schedule was entitled "overtime" rates. This opinion designates these rates as contract straight time and contract overtime. For four types of cargo, the overtime rates were exactly one and a half times the straight time rates; for four other types, the overtime rates were slightly less than one and a half times the straight time rates. The contract straight time rates ranged from $1.25 to $2.50 an hour. The contract overtime rates were paid for all work on Sundays and legal holidays. The contract provided for no differential for work in excess of forty hours in a week. [Footnote 5]

Page 334 U. S. 452

Respondents claim that their regular rate of pay under the contract for any workweek within the meaning of

Page 334 U. S. 453

§ 7(a), is the average hourly rate computed by dividing the total number of hours worked in any workweek for any single employer into the total compensation received from that employer during that week, and that, in those workweeks in which they worked more than forty hours for any one employer, they were entitled by § 7(a) to statutory excess compensation for all such excess hours computed on the basis of that rate. The petitioners claim that the straight time rates are the regular rates, and that they have therefore, with minor exceptions not presented by this review, complied with the requirements of § 7(a). That is, no rates except straight time rates are to be taken into consideration in computing the regular rate. The petitioners contend that the contract overtime rates were intended to cover any earned statutory excess compensation, and did cover it, because they were substantially in an amount of one and one-half times the straight time rates. The District Court held that the contract straight time rates were the regular rates, but the Circuit Court of Appeals for the Second Circuit held otherwise. [Footnote 6]

Throughout all these proceedings, the petitioners have been represented by the Department of Justice, since the United States, under its cost-plus contracts with the petitioners, is the real party in interest. Substantially all stevedoring during the war years was performed for the account of the United States. The Solicitor General notes that, prior to the decision in the Circuit Court of Appeals, 118 suits had been instituted on behalf of longshoremen, and, since that time, approximately 100 new complaints have been filed. Contracts of the same general type are said to have been in effect in all our maritime areas. Witnesses testifying before the Wages and Hours

Page 334 U. S. 454

Subcommittee of the House Committee on Education and Labor stated that liability of the Government under such suits would be large. [Footnote 7] The Wage and Hour Administrator has not filed a brief in the proceedings, but the Solicitor General has advised us that the Administrator of the Wage and Hour Division of the Department of Labor

"believes that proper consideration was given by the court below to his interpretation of Section 7 of the Fair Labor Standards Act and that the decision below is correct."

The Administrator and the Solicitor of the Department of Labor testified at length before the House committee as to their views on the issues presented by these cases. [Footnote 8] Amicus briefs have been filed by the International Longshoremens Association, the National Association of Manufacturers, and the Waterfront Employers

Page 334 U. S. 455

Association of the Pacific Coast, all urging that the decision below be reversed.

In order to fix the legal issues in their factual setting, we summarize the findings of fact made by the District Court which were accepted by the Circuit Court of Appeals and are not challenged here. Most of these findings referred to in this opinion will be found in the Appendix at 162 F.2d 670. Employment in the longshore industry has always been casual in nature. The amount of work available depends on the number of ships in port and their length of stay, and is consequently highly variable and unpredictable, from day to day, week to week, and season to season. Longshoremen are hired for a specific job at the "shape," [Footnote 9] which is normally held three times a day at each pier where work is available. The hiring stevedore selects the men he desires from the longshoremen who are present at the "shape;" in some instances, a group of longshoremen are hired together as a gang. The work may last only for a few hours or for as long as a week. Although some work is carried on at all hours, the stevedoring companies, since operations are then carried on at less cost, attempt to do as much work as possible during the straight time hours.

Page 334 U. S. 456

The court further found that the rate for night work and holiday work had been higher than the rate for day work since at least as far back as 1887, and that, since 1916, when the first agreement was made with the International Longshoremens Association, the differential had been approximately 50%. Joseph B. Ryan, President of the Association, testified that the differential was designed to shorten the total number of hours worked and to confine the work as far as possible within the scheduled forty-four hours. Despite the differential, many longshoremen were unwilling to work at night. Although some longshore work was required at all hours, except Saturday night, the District Court found that the differential had been responsible for the high degree of concentration of longshore work to the contract straight time hours.

The government introduced elaborate statistical studies to show the distribution of work as between the contract straight time and contract overtime hours. From 1932 to 1937, 80% of the total hours worked were within the contract straight time hours and only 2 1/2% of the total man-hours were performed by men working between 5 p.m. and 8 a.m. (exclusive of Sundays and holidays) who had worked no straight time hours earlier that day. During the war, the proportion of work in contract overtime hours was considerably higher because of the greater volume of cargo handled; 55% of the total hours fell within the contract straight time hours, and the ratio of work in contract overtime hours by men who had not previously worked in the contract straight time hours was correspondingly higher. The respondents' employment was highly irregular; in many weeks, the respondents did not work at all, and in weeks in which they did work, their hours of employment varied over a wide range. The trial court concluded that

Page 334 U. S. 457

the "basic working day" and "basic working week," [Footnote 10] meaning by these phrases the contract straight time hours, were not the periods "normally, regularly, or usually" worked by the respondents. Finding 45.

In giving judgment for the petitioners, the trial court placed emphasis on the fact that the rates in question were arrived at through bona fide collective bargaining, and were more favorable to the longshoremen than the statutory mandate required. That is, that rates as high as contract straight time rates plus statutory excess compensation were paid to all workers for all work in contract overtime hours whether required by § 7(a) or not. The District Court opinion referred to Joseph B. Ryan's statement that the International Longshoremens Association was opposed to the suit "as it might wipe out all of the gains we had made for our men over a period of 25 years." [Footnote 11] It rejected respondents' alternative contentions

Page 334 U. S. 458

that the regular rate was to be determined by the average rate during the first forty hours or by the average rate for all hours worked. It noted that shift differentials were usually five or ten cents an hour, and seldom exceeded fifteen cents, and were not designed to deter the employer from working employees during the period for which the differential was paid; in the present case, the trial judge found that the 50% differential was designed to deter, and actually did deter, work outside contract straight time hours. Accordingly, the trial court concluded that the "collectively bargained agreement established a regular rate" under the Fair Labor Standards Act -- the contract straight time rate. 69 F.Supp. 956, 958.

The Circuit Court of Appeals held that the regular rate must be determined as an "actual fact," and could not be arranged through a collective bargaining agreement, citing 149 Madison Ave. Corp. v. Asselta,331 U. S. 199. That court therefore concluded that, on the basis of the findings below, the regular rate must be computed by dividing the total number of hours worked into the total compensation received. The court rejected the contention that the regular rate was the average rate for the first forty hours of work, citing Walling v. Halliburton Oil Well Cementing Co.,331 U. S. 17. The judgment of the District Court was reversed with directions to determine the amounts due plaintiffs in the light of the Portal-to-Portal Act of 1947, 61 Stat. 84. No determination of the scope or validity of that act was attempted, as those matters had not been argued. 162 F.2d 673.

Page 334 U. S. 459

On account of the importance of the method of computing the regular rate of pay in employment contracts providing for extra pay, we granted certiorari. [Footnote 12] 332 U.S. 814.

The government adopts the view of the District Court that the contract straight time rates constituted the regular rates within the meaning of § 7(a) of the Fair Labor Standards Act. The government accepts, too, the reasoning of the District Court that the contract overtime rates, as they were coercive in the sense that they were intended to exert pressure on employers to carry on their activities in the straight time hours, were not regular rates, and could be credited against required statutory excess compensation in the amount that the contract overtime rates exceeded the contract straight time rates. The government argues in the alternative that the "normal, non-overtime workweek," said to be the hours controlling the regular rate of pay, is to be determined by reference to peacetime conditions, rather than the abnormal wartime conditions, and that the statistical studies show that the work of longshoremen is sufficiently concentrated within the scheduled hours to compel the finding that the contract straight time hours are the regular working hours. The government urges also that the contract, as thus interpreted, accords with congressional purposes in enacting the Fair Labor Standards Act. It is said to reduce working hours and spread employment and to preserve the integrity of collective bargaining.

We agree with the conclusion reached by the Circuit Court of Appeals. Later in this opinion, pp. 334 U. S. 465-471, we set out our reasons for concluding that the extra pay for contract overtime hours is not an overtime premium. Where there are no overtime premium payments, the rule

Page 334 U. S. 460

for determining the regular rate of pay is to divide the wages actually paid by the hours actually worked in any workweek and adjudge additional payment to each individual on that basis for time in excess of forty hours worked for a single employer. Any statutory excess compensation so found is, of course, subject to enlargement under the provisions of § 16(b). Compare § 11 of Portal-to-Portal Act of 1947. This determination, we think, accords with the statute and the terms of the contract.

(1) The statute, § 7(a), expresses the intention of Congress "to require extra pay for overtime work by those covered by the Act even though their hourly wages exceeded the statutory minimum." The purpose was to compensate those who labored in excess of the statutory maximum number of hours for the wear and tear of extra work, and to spread employment through inducing employers to shorten hours because of the pressure of extra cost. [Footnote 13] The statute, by its terms, protects the group of employees by protecting each individual employee from overly long hours. So, although only one of a thousand works more than forty hours, that one is entitled to statutory excess compensation. That excess compensation is fixed by § 7(a) at "one and one-half times the regular rate at which he is employed." The regular rate of pay of the respondents under this contract must therefore be found.

The statute contains no definition of regular rate of pay, and no rule for its determination. Contracts for pay take many forms. The rate of pay may be by the hour, by piecework, by the week, month or year, and with or without a guarantee that earnings for a period of time shall be at least a stated sum. The regular rate may vary from week to week. Overnight Motor Transp. Co. v. Missel,

Page 334 U. S. 461

316 U. S. 572, 316 U. S. 580; Walling v. A. H. Belo Corp.,316 U. S. 624, 316 U. S. 632. The employee's hours may be regular or irregular. From all such wages, the regular hourly rate must be extracted. As no authority was given any agency to establish regulations, courts must apply the statute to this situation without the benefit of binding interpretations within the scope of the Act by an administrative agency. [Footnote 14]

Every contract of employment, written or oral, explicitly or implicitly includes a regular rate of pay for the person employed. Walling v. A. H. Belo Corp., supra,316 U. S. 631; Walling v. Halliburton Oil Well Cementing Co., supra. We have said that "the words regular rate' . . . obviously mean the hourly rate actually paid for the normal, nonovertime workweek." Walling v. Helmerich & Payne,323 U. S. 37, 323 U. S. 40. See United States v. Rosenwasser,323 U. S. 360, 323 U. S. 363. "Wage divided by hours equals regular rate." Overnight Motor Transp. Co. v. Missel, supra,316 U. S. 580.

"The regular rate by its very nature must reflect all payments which the parties have agreed shall be received regularly during the workweek, exclusive of overtime payments. It is not an arbitrary label chosen by the parties; it is an actual fact. Once the parties have decided upon the amount of wages and the mode of payment, the determination of the regular rate becomes a matter of mathematical computation the result of which is unaffected by any designation of a contrary 'regular rate' in the wage contracts."

Walling v. Youngerman-Reynolds Hardwood Co.,325 U. S. 419, 325 U. S. 424-425. The result is an "actual fact." 149 Madison Ave. Corp. v. Asselta, supra,331 U. S. 204.

In dealing with such a complex situation as wages throughout national industry, Congress necessarily had to

Page 334 U. S. 462

rely upon judicial or administrative application of its standards in applying sanctions to individual situations. These standards had to be expressed in words of generality. The possible contract variations were unforeseeable. In Walling v. A. H. Belo Corp., supra,316 U. S. 634, this Court refrained from rigidly defining "regular rate" in a guaranteed weekly wage contract that met the statutory requirements of § 7(a) for minimum compensation. In the Belo case, the contract called for a regular or basic rate of pay above the statutory minimum and a guaranteed weekly wage of 60 times that amount. As the hourly rate was kept low in relation to the guaranteed wage, statutory overtime plus the contract hourly rate did not amount to the guaranteed weekly wage until after 54 1/2 hours were worked. P. 316 U. S. 628. We refused to require division of the weekly wage actually paid by the hours actually worked to find the "regular rate" of pay, and left its determination to agreement of the parties. Where the same type of guaranteed weekly wages were involved, we have reaffirmed that decision as a narrow precedent principally because of public reliance upon and congressional acceptance of the rule there announced. Walling v. Halliburton Oil Well Cementing Co., supra. Aside from this limitation of Belo, the case itself is not a precedent for these cases, as, in Belo, the statutory requirements of minimum wages and statutory excess compensation were provided by the Belo contract. In these present cases, no provision has been made for any statutory excess compensation, and none can be earned by any respondent based on the contract overtime pay. Our assent to the Belo decision, moreover, does not imply that mere words in a contract can fix the regular rate. [Footnote 15] That

Page 334 U. S. 463

would not be the maintenance of a flexible definition of regular rate, but a refusal to apply a statutory requirement for protecting workers against excessive hours. The results on the individual of the operations under the contract must be tested by the statute. [Footnote 16] As Congress left the regular rate of pay undefined, we feel sure the purpose was to require judicial determination as to whether, in fact, an employee receives the full statutory excess compensation, rather than to impose a rule that, in the absence of fraud or clear evasion, employers and employees might fix a regular rate without regard to hours worked or sums actually received as pay.

Further, we reject the argument that, under the statute, an agreement reached or administered through collective bargaining is more persuasive in defining regular rate than individual contracts. Although our public policy recognizes the effectiveness of collective bargaining and encourages its use, [Footnote 17] nothing to our knowledge in any act authorizes us to give decisive weight to contract declarations as to the regular rate because they are the result of collective bargaining. 149 Madison Ave. Corp. v. Asselta, supra, p. 331 U. S. 202 and 331 U. S. 204; Walling v. Harnischfeger Corp.,325 U. S. 427, 325 U. S. 432. [Footnote 18] A vigorous argument is presented for petitioners by the International Longshoremens Association that a collectively obtained and administered agreement

Page 334 U. S. 464

should be effective in determining the regular rate of pay, [Footnote 19] but we think the words of and practices under the contract are the determinative factors in finding the regular rate for each individual.

As the regular rate of pay cannot be left to a declaration by the parties as to what is to be treated as the regular rate for an employee, it must be drawn from what happens under the employment contract. We think the most reasonable conclusion is that Congress intended the regular rate of pay to be found by dividing the weekly compensation by the hours worked, unless the compensation by the hours employee contains some amount that represents an overtime premium. If such overtime premium is included in the weekly paycheck, that must be deducted before the division. This deduction of overtime premium from the pay for the workweek results from the language of the statute. When the statute says that the employee shall receive for his excess hours one and one-half times the regular rate at which he is employed, it is clear to us that Congress intended to exclude overtime premium payments from the computation of the regular rate of pay. To permit overtime premium to enter into the computation of the regular rate would be to allow overtime premium on overtime premium -- a pyramiding that Congress could not have intended. In order to avoid a similar double payment, we think that any overtime premium paid, even if for work during the first forty hours of the workweek, may be credited against any obligation to pay

Page 334 U. S. 465

statutory excess compensation. These conclusions accord with those of the Administrator. [Footnote 20]

The definition of overtime premium thus becomes crucial in determining the regular rate of pay. We need not pause to differentiate the situations that have been described by the word "overtime." [Footnote 21] Sometimes it is used to denote work after regular hours, sometimes work after hours fixed by contract at less than the statutory maximum hours, and sometimes hours outside of a specified clock pattern, without regard to whether previous work has been done, e.g., work on Sundays or holidays. It is not a word of art. See Premium Pay Provisions in Union Agreements, Monthly Labor Review, United States Department of Labor, October, 1947, Vol. 65, No. 4. Overtime premium has been used in this opinion as defined in note 3 It is that extra pay for work because of previous work for a specified number of hours in the workweek or workday. It is extra pay of that kind which we think that Congress intended should be excluded from computation of regular pay. Otherwise, the purpose of the statute to require payment to an employee for excess hours is expanded extravagantly by computing regular rate of pay upon a payment already made for the same purpose for which § 7(a) requires extra pay, to-wit, extra pay because of excess working hours. Accordingly, statutory excess compensation paid for work in excess of forty hours should not be used to figure the regular rate. Neither should similar contract excess compensation for work

Page 334 U. S. 466

because of prior work be used in such a calculation. Extra pay by contract because of longer hours than the standard fixed by the contract for the day or week has the same purpose as statutory excess compensation, and must likewise be excluded. [Footnote 22] Under the definition, a mere higher rate paid as a job differential or as a shift differential, or for Sunday or holiday work, is not an overtime premium. It is immaterial in determining the character of the extra pay that an employee actually has worked at a lower rate earlier in the workweek prior to the receipt of the higher rate. The higher rate must be paid because of the hours previously worked for the extra pay to be an overtime premium.

Page 334 U. S. 467

The trial court refused to accept the respondents' contention that the contract overtime rate was a shift differential, partly because it was felt that such a holding would have a disruptive effect on national economy. 69 F.Supp. 958, 959. We use as examples three illustrations employed by the District Court to illustrate its understanding of the effect of respondents' contentions to employment situations. That court thought these illustrations indicated additional liability from the employer under § 7(a). [Footnote 23] We do not agree. Our conclusions as to the trial court's illustrations vary from those of the trial court because that court did not deduct overtime premiums, as we have defined them, actually paid from the weekly wage before dividing by the hours worked. See quotation from Walling v. Youngerman-Reynolds Hardwood Co., supra, at p. 334 U. S. 461, this opinion. (1) The employment contract calls for an overtime premium for work beyond thirty-six hours. Such extra pay should not be included as weekly wages in any computation of the regular rate at which a man works. [Footnote 24] (2) A contract

Page 334 U. S. 468

provides for payment of time and a half for work in excess of eight hours in a single workday. An employee who works five ten-hour days would have no claim for statutory excess compensation if paid the amount due by the contract. [Footnote 25] Or (3) a contract provides for a rate of $1 an hour for the first 40 hours and $1.50 for all excess hours; an employee works 48 hours and receives $52. To find his regular rate of employment, the overtime premium of $4 should be deducted, and the resulting sum divided by 48 hours. [Footnote 26] On the other hand, a man might be employed as a night watchman on an eight-hour shift at time and a half the wage rate of day watchmen. This would be extra pay for undesirable hours. It is a shift differential. It would not be overtime premium pay, but would be included in the computation for determining overtime premium for any excess hours. [Footnote 27]

Where an employee receives a higher wage or rate because of undesirable hours or disagreeable work, such

Page 334 U. S. 469

wage represents a shift differential or higher wages because of the character of work done or the time at which he is required to labor, rather than an overtime premium. [Footnote 28] Such payments enter into the determination of the regular rate of pay. See Cabunac v. National Terminals Corp., 139 F.2d 853.

The trial court seemed to assume that, if the contract overtime rate were a shift differential, the employee who worked on a higher paid shift would be entitled to have his higher shift rates enter into the computation of regular rate of pay. One of the reasons for not allowing the contract overtime rates in the computation of regular rate of pay was that it thought the great difference between the contract straight time and contract overtime rates showed that the premium paid by contract was not a shift differential, but a true overtime premium. In this we think the trial court erred. The size of the shift differential cannot change the fact that large wages were paid for work in undesirable hours. It is like a differential for dangerous work. This contract called for $2.50 straight time hourly rate for handling explosives. The statutory excess compensation would, of course, be $3.75 per hour. If an employee receives from his employer a

Page 334 U. S. 470

high hourly rate of pay for hard or disagreeable duty, he is entitled to the statutory excess compensation figured on his actual pay.

Nor do we find the District Court's reliance upon the fact that the overtime rates were employed in order to concentrate the work of the longshoremen in the straight time hours relevant to a determination of the respondents' rate of pay. The District Court thought the concentration was significant. It did not test whether the contract overtime rates contained overtime premium payments by considering whether the employee actually received extra compensation for excess hours. We accept the District Court's holding that this concentration was an intended effect of the overtime rates, and that the higher rates did contribute to the concentration of the work in the straight time hours as set out in a preceding paragraph of this opinion. P. 334 U. S. 456, supra. Such a concentration tends, in some respects, to the employment of more men, as there is pressure for more work to be done in the straight time hours. Overnight Motor Transp. Co. v. Missel, supra,316 U. S. 578. However, the pressure of the contract overtime wages is not solely toward a spread of employment. Since work is in fact done outside straight time hours, the employer can use men who have previously worked in straight time hours in contract overtime hours without additional cost.

But spread of employment is not the sole purpose of the forty-hour maximum provision of § 7(a). Its purpose is also to compensate an employee in a specific manner for the strain of working longer than forty hours. Overnight Motor Transp. Co. v. Missel, supra,316 U. S. 578. The statute commands that an employee receive time and one-half his regular rate of pay for statutory excess compensation. The contract here in question fails to give that compensation to an employee who works all or part of his time in the less desirable contract overtime hours. Looked at

Page 334 U. S. 471

from the individual standpoint of respondents, the concentration of work does not have any effect upon their regular rate of pay. Because of this defect, the concentration of work brought about by the contract has no effect in the determination of the regular rate of pay. As we indicated at the beginning of this subdivision (1), a major purpose of the statute was to compensate an employee by extra pay for work done in excess of the statutory maximum hours. Thus, the burdens of overly long hours are balanced by the pay of time and a half for the excess hours.

We therefore hold that overtime premium, deductible from extra pay to find the regular rate of pay, is any additional sum received by an employee for work because of previous work for a specified number of hours in the workweek or workday, whether the hours are specified by contract or statute. [Footnote 29]

(2) Since, under Interpretative Bulletin No. 4, § 69, the Administrator refers to regular working hours as important in calculating the regular rate of pay under

Page 334 U. S. 472

§ 7(a) of the Act, a word must be said as to regular working hours in this case. [Footnote 30] "Regular working hours" apparently has not been defined by the Administrator. He could hardly have intended in § 69 to employ the statutory maximum hours as synonymous with regular working hours, as there is no prohibition on regular working hours that are longer than the statutory maximum. His illustrations, numbers 2 and 3, show that overtime premiums may be earned within the first 40 hours of a workweek. The statutory maximum hours are significant only as requiring overtime premium pay. An employer may increase pay or decrease hours free as to those steps from statutory regulation. See article in Monthly Labor Review, supra. The trial court pointed out that

"The identifying mark of the case at bar is the absence of any norm, any regularity. Both parties have emphasized the casual, irregular character of the employment."

69 F.Supp. 959, 960. The trial court, as we have heretofore stated, pp. 334 U. S. 456-457, also found that the "basic working day," defined by § 2(a) of the agreement set forth in note 5supra, was not the day normally, regularly, or usually worked by respondents. Indeed, the contract, § 1, required these round-the-clock irregular hours from some

Page 334 U. S. 473

individuals. We call attention to the problem only to lay it aside as inapplicable in this case.

However, the government contends in this case that regular working hours are important, that the contract fixed regular working hours as the straight time hours, and that, as an actual fact, as shown by the statistics of concentration of work in straight time hours, p. 334 U. S. 456, supra, the straight time hours were the regular working hours of all longshoremen. The government concludes from this that the contract straight time pay is the regular rate of pay, and the contract overtime pay includes a true overtime premium. We may be mistaken in thus limiting the government's argument on this point. If the government means that any extra pay to an employee for work outside regular working hours of the group of employees is to be excluded from the computation of the regular rate, we do not think that contention sound. The defect in this argument, however the government's position is construed, is that it treats of the entire group of longshoremen, instead of the individual workmen, respondents here. The straight time hours can be the regular working hours only to those who work in those hours. The work schedule of other individuals in the same general employment is of no importance in determining regular working hours of a single individual. As a matter of fact, regular working hours under a contract, even for an individual, has no significance in determining the rate of pay under the statute. It is not important whether pay is earned for work outside of regular working hours. The time when work is done does not control whether or not all or a part of the pay for that work is to be considered as a part of the regular pay.

We think, therefore, that this case presents no problems that involve determination of the regular hours of work. As an employment contract for irregular hours,

Page 334 U. S. 474

the rule of dividing the weekly wage by the number of hours worked to find the regular rate of pay would apply. Cf. Overnight Motor Transp. Co. v. Missel, supra, at 316 U. S. 580.

(3) The contract was interpreted by the Shipping Association and the Longshoremens Association as providing that the contract straight time was the regular rate. The parties to the contract indicated by their conduct that the contract overtime was the statutory excess compensation or an overtime premium. Finding 43, 162 F.2d at 672; seenote 33infra. [Footnote 31] Apparently, no dispute or controversy arose over this interpretation, although the contract, § 19, made provision for the resolution of such disagreements. The trial court determined that the straight time hourly rate was the regular rate at which respondents were employed. [Footnote 32] This construction by the parties and the court's conclusion, supported by evidence, leads us to consider this agreement as though there was a paragraph which read to the effect that the straight time rate is the regular rate of pay. We should also consider that the contract provided that the contract overtime rates were intended to provide any statutory excess compensation, when men worked more than forty hours except in those situations where the entire time, including the excess, was in the straight time hours. [Footnote 33] This, of course,

Page 334 U. S. 475

does not mean that respondents here were familiar with these purposes of the agreement. So far as the record shows, they worked for the pay promised under the words of the contract. It shows nothing more on this point.

Under the contract we are examining, the respondents' work in overtime hours was performed without any relation as to whether they had or had not worked before. Under our view of § 7(a)'s requirements, their high pay was not because they had previously worked, but because of the disagreeable hours they were called to labor or because the contracting parties wished to compress the regular working days into the straight time hours as much as possible. As heretofore pointed out, we need not determine what were the regular working hours of these respondents. If it were important, the trial court determined that their regular working hours were not the straight time hours. They worked at irregular times. Finding 45, 162 F.2d at 672. The record shows that all respondents worked 5,201 straight time hours and 20,771 overtime hours. Four of the twenty respondents worked no straight time hours. Five others worked less than 100 straight time hours. Three worked more straight time than overtime. The record does not show the hours these respondents worked for other employers. That fact is immaterial in this case, as respondents seek recovery only from petitioner employers. These round-the-clock hours were in strict accordance with the contract which allowed the Longshoremens Association to furnish all men needed and called for the men to "work any night of the week, or on Sundays, holidays or Saturday afternoons when required." §§ 1 and 2; seenote 5 Men who worked contract overtime hours were entitled to contract overtime pay. They were given no overtime premium pay because

Page 334 U. S. 476

of long hours. It is immaterial that his regular rate may greatly exceed the statutory minimum rate. This contract overtime rate therefore did not meet the excess pay requirements of § 7.

In finding the statutory excess compensation due respondents, the trial court must determine the method of computation. Each respondent is entitled to receive compensation for his hours worked in excess of forty at one and a half times his regular rate, computed as the weighted average of the rates worked during the week. In computing the amount to be paid, the petitioners may credit against the obligation to pay statutory excess compensation the amount already paid to each respondent which is allocable to work in those excess hours. The precise method for computing this credit presents the difficulty. According to the Administrator's interpretation, an employer may credit himself with an amount equal to the number of hours worked in excess of forty multiplied by the regular rate of pay for the entire week, rather than an amount equal to the number of hours worked in excess of forty multiplied by the average rate of pay for those excess hours. [Footnote 34] Under that formula, each respondent

Page 334 U. S. 477

is entitled, as statutory excess compensation, to an additional sum equal to the number of hours worked for one employer in a workweek in excess of forty, multiplied by one-half the regular rate of pay. On the record before us, that interpretation seems to be a reasonable one; we leave a final determination of the point to the District Court on further proceedings.

The Circuit Court ordered the case remanded to the District Court for determination of the amounts due respondents in accordance with its opinion. By a further order, it allowed the District Court to consider any matters presented to it by petitioners as a defense in whole or in part under the Portal to Portal Act. We modify these orders so as to permit the District Court to allow any amendments to the complaint or answer or any further evidence that the District Court may consider just.

As so modified, the judgment of the Circuit Court of Appeals is affirmed.

MR. JUSTICE DOUGLAS took no part in the consideration or decision of this case.

* Together with No. 367, Huron Stevedoring Corp. v. Blue et al., also on certiorari to the same court.

[Footnote 1]

52 Stat. 1060, 1063, approved June 25, 1938; § 7(a) took effect 120 days later, § 7(d). No problem as to the length of time any employee worked is presented. See Tennessee Coal, Iron & R. Co. v. Muscoda Local,321 U. S. 590; Anderson v. Mt. Clemens Pottery Co.,328 U. S. 680. Portal-to-Portal Act of 1947, 61 Stat. 84.

[Footnote 2]

The use of the word "overtime" in the contract does not decide this case. The problem for solution is whether rates described as "overtime" by the contract actually are such rates as § 7(a) provides for statutory excess hours.

As will hereafter appear, we consider the contract as intending to provide statutory excess compensation and overtime premium. Consequently, we accept the word "overtime" used in the contract to describe one wage scale as having been intended by the parties to the contract to satisfy fully the requirements of § 7(a).

[Footnote 3]

The following phrases are used in this opinion with the following meaning. These definitions do not apply to quotations.

Extra pay. -- Any increased differential from a lower pay scale for work after a certain number of hours in a workday or workweek or for work at specified hours.

Overtime premium. -- Extra pay for work because of previous work for a specified number of hours in the workweek or workday, whether the hours are specified by contract or statute.

Statutory excess compensation. -- Additional compensation required to be paid by § 7(a), F.L.S.A.

Regular rate of pay. -- Total compensation for hours worked during any workweek less overtime premium divided by total number of hours worked.

The following definitions apply to the circumstances of this contract only:

Contract straight time. -- Compensation paid under the longshoring contract for work during the hours defined in par. 3(a) of the contract, as follows: 8 a.m. to 12 noon and from 1 p.m. to 5 p.m., Monday to Friday, inclusive, and from 8 a.m. to 12 noon Saturday.

Contract overtime. -- Additional compensation which the contract requires shall be paid for work on legal holidays and for work at hours other than those specified in par. 3(a).

[Footnote 4]

52 Stat. 1069, § 16:

"(b) Any employer who violates the provisions of section 6 or section 7 of this Act shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. . . . The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action."

[Footnote 5]

The Agreement contains the following provisions with respect to the hours of work and scale of wages:

"

I

. General Cargo Agreement"

"1. Members of the party of the second part shall have all of the work pertaining to the rigging up of ships and the coaling of same, and the discharging and loading of all cargoes including mail, ships' stores and baggage. When the party of the second part cannot furnish a sufficient number of men to perform the work in a satisfactory manner, then the party of the first part may employ such other men as are available."

"2. (a) The basic working day shall consist of 8 hours, and the basic working week shall consist of 44 hours. Men shall work any night of the week, or on Sundays, Holidays, or Saturday afternoons, when required. On Saturday night, work shall be performed only to finish a ship for sailing on Sunday, or to handle mail or baggage."

"(b) Meal hours shall be form 6 A.M. to 7 A.M., from 12 Noon to 1 P.M., from 6 P.M. to 7 P.M., and from 12 midnight to 1 A.M."

"* * * *"

"(c) Legal Holidays shall be: New Year's Day, Lincoln's Birthday, Washington's Birthday, Good Friday on the New Jersey Shore, Decoration Day, Fourth of July, Labor Day, Columbus Day, Election Day, Armistice Day, Thanksgiving, Christmas, and such other National or State Holidays as may be proclaimed by Executive authority."

"* * * *"

"3. (a) Straight time rate shall be paid for any work performed from 8 A.M. to 12 Noon and from 1 P.M. to 5 P.M., Monday to Friday, inclusive, and from 8 A.M. to 12 Noon Saturday."

"(b) All other time, including meal hours and the Legal Holidays specified herein, shall be considered overtime, and shall be paid for at the overtime rate."

"(c) The full meal hour rate shall be paid if any part of the meal hour is worked and shall continue to apply until the men are relieved."

"4. Wage Scale: The wage scale shall be as follows:"

Straight

Time Overtime

Hourly Hourly

Rate Rate

(a) General Cargo of every description, includ-

ing barrel oil when part of General Cargo,

and all General Cargo handled in refrig-

erator space with the temperature above

freezing . . . . . . . . . . . . . . . . . $1.25 $1.87 1/2

"Extra rates are paid for special types of cargo. For example:"

(d) Wet hides, creosoted poles, creosoted ties;

creosoted shingles and soda ash in bags. . $1.40 $2.02 1/2

[Footnote 6]

Addison v. Huron Stevedoring Corp., 69 F.Supp. 956; Aaron v. Bay Ridge Operating Co., 162 F.2d 665.

[Footnote 7]

Mr. Walter E. Maloney, representing the National Federation of American Shipping, testified that liability to the Government on stevedoring contracts might run as high as $260,000,000, although he admitted that the amount of liability was "almost impossible to calculate." Hearings before Subcommittee No. 4 of the House Committee on Education and Labor, 80th Cong., 1st Sess., pp. 1198-1205. Committee members referred to the amounts in question as $236,000,000, $340,000,000, and $300,000,000. Hearings, supra, pp. 1203, 2283, 2469. The basis for such figures does not appear. Nor is it made clear whether the Portal-to-Portal Act was in mind. 61 Stat. 84, Pt. IV, §§ 9 and 11.

The International Longshoremens Association claims to have approximately 80,000 members in United States and Canada. Thirty thousand are said to work in the Port of New York, and the terms adopted in the New York contract are generally followed in other ports. The Waterfront Employers Association of the Pacific Coast states that 20,000 stevedores are covered by 21 collective bargaining contracts, of which 3 are with the International Longshoremen's and Warehousemen's Union. The current New York contract with the I.L.A. and the 21 agreements between the Pacific Association and the I.L.A. and I.L.W.U. are said to contain clauses permitting cancellation if the courts sustain the claims of plaintiffs in this suit.

[Footnote 8]

Hearings, supra,note 7 2467-2471; 2474-2482; 2736-2762.

[Footnote 9]

The trial court gave the following explanation of the "shape," Finding 16:

"At three stated hours during the day, namely at 7.55 a.m., 12.55 p.m., and 6.55 p.m., men seeking employment gather in a group or semicircle, constituting the 'shape,' at the head of a pier where work is available. The foreman stevedore then selects from the 'shape' such men as he desires to hire, to work until 'knocked off,' that is, told to quit. The selection of a man from the shape carries with it no obligation on the part of the employer concerning any specified length of employment, except for work requirements of the Collective Agreement relating to minimum hours under specified conditions. The duration of employment depends entirely upon the determination of the stevedore or the steamship company."

[Footnote 10]

The trial court found, Finding 13, that "The work week commenced on Monday at 7 a.m. and ended the following Monday at 7 a.m." The 44-hour week had been in the contracts between the Shipping Association and the Longshoremens Association prior to the Fair Labor Standards Act. No adjustment of the basic workweek was made in the contract when the 42- and 40-hour provisions of § 7(a) became effective.

[Footnote 11]

Mr. Ryan explained the Association objective as follows:

"Our objective was to de-casualize longshore work as much as possible, to have the work done in the daytime as much as possible, and make it as expensive for the employers as possible on Sunday. Before there was any union, we had double time for Sunday. We wanted to work in the daytime. We figured we only live once. We want the daytime when every man who wants to work wants it done in the daytime, and not during overtime. The employers would say it cannot be done in the steamship industry. I think we have proven for them that, after 30 years of negotiating many of the things they said could not be done in the industry, when they found it too expensive to do it in any other way, have been done."

"Q. Do the men object to working outside of a normal day?"

"A. Absolutely."

Furthermore, as the Longshoremens Association's primary interest is as stated above by Mr. Ryan, it fears the effect on their employment contract of a holding that the contract overtime rate must be used in the determination of statutory excess compensation. The Shipping Association might insist on a reduction of the contract overtime rate if payment of that rate were not to be treated as a satisfaction of the statutory requirements.

[Footnote 12]

Seenote 7supra.

[Footnote 13]

Overnight Motor Transp. Co. v. Missel,316 U. S. 572, 316 U. S. 577-578; Walling v. Helmerich & Payne,323 U. S. 37, 323 U. S. 40; Brooklyn Sav. Bank v. O'Neil,324 U. S. 697, 324 U. S. 706; Jewell Ridge Coal Corp. v. Local,325 U. S. 161, 325 U. S. 167.

[Footnote 14]

Kirschbaum Co. v. Walling,316 U. S. 517, 316 U. S. 523; see § 9, Part IV, Portal-to-Portal Act, 61 Stat. 84, 88.

[Footnote 15]

149 Madison Ave. Corp. v. Asselta, supra, p. 331 U. S. 204:

"The crucial questions in this case, however, are whether the hourly rate derived from the formula here presented was, in fact, the 'regular rate' of pay within the statutory meaning, and whether the wage agreement under consideration in fact made adequate provision for overtime compensation."

Walling v. Harnischfeger Corp.,325 U. S. 427, 325 U. S. 432.

[Footnote 16]

Walling v. Youngerman-Reynolds Hardwood Co., supra,325 U. S. 424; Walling v. Harnischfeger Corp., supra,325 U. S. 430.

[Footnote 17]

National Labor Relations Act, 49 Stat. 449; Labor Management Relations Act of 1947, 61 Stat. 136; Norris-LaGuardia Act, 47 Stat. 70, § 2; Portal-to-Portal Act of 1947, 61 Stat. 84, § 1.

[Footnote 18]

The contention, however, found favor with the District Court:

"Such catastrophic results are inevitable once we accept plaintiffs' underlying premise -- that, in determining the 'regular rate' intended by Congress, we must close our eyes to the contract in good faith negotiated between employer and employees and look only to the actual work pattern. Upon such a premise, genuine collective bargaining cannot live."

69 F.Supp. 956, 959.

[Footnote 19]

"Collective bargaining, to be effective, must necessarily deal with large groups -- with all the workers in the industry, or its subdivision, on whose behalf the bargaining is being conducted. And when, as in the I.L.A., such collective agreements are submitted to a vote of the membership affected, and that approval of the bargain thus arrived at is voted, it would make collective bargaining a mockery if some of them could seek special terms because, for a short period of time, their work experience has varied in some degree from that of their fellow workers."

[Footnote 20]

[Footnote 21]

Cf. Finding 28(a):

"Prior to the Fair Labor Standards Act, the word overtime had a generally accepted meaning in American industry -- namely, excess time, to which a penalty rate of compensation was applied to discourage such work. The idea of excessivity, however, was not an indispensable element of the concept of overtime as understood. Overtime was also understood to cover hours outside of a specified clock pattern."

[Footnote 22]

The holding in Walling v. Helmerich & Payne, supra, is not to the contrary of this position. The facts of that case indicated a palpable evasion of the statutory purposes. See 69 F.Supp. at 958, note 1.

Nor is the decision in 149 Madison Ave. Corp. v. Asselta, supra, opposed to this position. In that case, weekly wage contracts calling for a workweek of 46 and 54 hours provided the following formula for determining the regular hourly rate of pay:

"The hourly rates for those regularly employed more than forty (40) hours per week shall be determined by dividing their weekly earnings by the number of hours employed plus one-half the number of hours actually employed in excess of forty (40) hours."

331 U.S. at 331 U. S. 202. Under that method of computation, an employee who worked 46 hours received a sum equal to what he would have received if he had been paid for 40 hours' work at the formula hourly rate and 6 hours of work at one and a half times the formula rate. As so construed, the extra pay for work in excess of 40 hours would be an overtime premium which could be excluded from the computation of the regular rate, and the regular rate would be the formula rate. The Court did not reach the question of the legality of that method of computation, as it held that, since the formula rate was not consistently employed in determining compensation, the formula rate could not be considered the regular rate for those who worked more that 40 hours. Accordingly, the regular rate was held to be the average of all wages actually paid during the entire week. See Asselta v. 149 Madison Ave. Corp., 156 F.2d 139, 141.

[Footnote 23]

The opinion stated:

"This controversy requires for its resolution a delicate adjustment to accommodate the harmonious application of three national policies. A heavy-handed meshing of these three policies with the industrial machine which fails to minimize the friction at their points of contact can generate enough heat to impair one or more of the policies or severely injure the machine itself."

"In chronological order, we have (1) the National Labor Relations Act, July 5, 1935, 49 Stat. 449, . . . to encourage the practice of collective bargaining; (2) the Fair Labor Standards Act, June 25, 1938, 52 Stat. 1060, . . . to correct and eliminate the labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general wellbeing of workers; (3) the national need during the war for the maximum of production, as illustrated by Executive Order 9301, February 9, 8 Fed.Reg. 1825, establishing the 48 hour week for the duration of the war."

69 F.Supp. 956, 958.

[Footnote 24]

36 hours x $1 + 14 hours x $1.50 = total wages $57. Regular rate = $57, less overtime premium of $7,

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