1. After enactment of the Fair Labor Standards Act, an employer
whose employees worked irregular hours varying from less than 30 to
more than 100 per week and formerly received fixed monthly
salaries, entered into contracts with them individually which in
each case specified a basic rate of pay per hour for the first 40
hours in any workweek and not less than one and one-half times that
rate per hour for overtime, with a guaranty that the employee
should receive each week for regular time and overtime not less
than a specified amount. Under this plan, the employee worked more
than 84 hours before he became entitled to any pay in addition to
the weekly guaranty, but, when he worked enough hours to earn more
than the guaranty, the surplus time was paid for at 150% of the
basic contract rate. His compensation equalled or exceeded that
which he was receiving when the Act went into effect, and exceeded
the minimum which the Act prescribes.
Held: this contract did not violate § 7(a) of the Act.
Pp.
331 U. S.
18-26.
2.
Walling v. Belo Corp., 316 U.
S. 624, followed.
Walling v. Helmerich & Payne,
Inc., 323 U. S. 37;
Overnight Motor Co. v. Missel, 316 U.
S. 572;
Walling v. Youngerman-Reynolds Hardwood
Co., 325 U. S. 419;
Walling v. Harnischfeger Corp., 325 U.
S. 427, distinguished. Pp.
331 U. S.
20-26.
152 F.2d 622 affirmed.
The District Court denied relief in a suit by the Wage and Hour
Administrator to enjoin alleged violations of § 7(a) of the Fair
Labor Standards Act. 57 F.Supp.
Page 331 U. S. 18
408. The Circuit Court of Appeals affirmed. 152 F.2d 622. This
Court granted certiorari. 328 U.S. 828.
Affirmed, p.
331 U. S.
26.
MR. CHIEF JUSTICE VINSON delivered the opinion of the Court.
This case brings here a question as to the application of the
overtime provisions of the Fair Labor Standards Act [
Footnote 1] to the payment of compensation
pursuant to employment contracts similar to those in
Walling v.
A. H. Belo Corp., 316 U. S. 624.
Respondent is engaged in the business of cementing, testing and
otherwise servicing oil wells, for which it uses its own peculiar
equipment. To operate this equipment respondent, retains a highly
stabilized group of skilled and specially trained "field
employees." The volume of respondent's business, however, is highly
inconstant.
Page 331 U. S. 19
Consequently, these employees are required to work a variable
number of hours from day to day and from week to week.
Prior to passage of the Act in 1938, these employees were paid
fixed monthly salaries. T hereafter, they were put on a "weekly
guarantee" plan similar to that which was to be involved in the
Belo case. This plan was abandoned March 1, 1942, under
pressure from the Administrator of the Act, and reinstated July 1,
1942, after the
Belo decision had seemed to end all
questions as to its legality. [
Footnote 2] Since its reinstatement, the plan has been
continuously in effect, and embodied in formal written contracts
between respondent and the employees to whom it has applied.
The part of these contracts now in issue is respondent's
agreement to pay these employees
"a regular basic rate of [a specified number of] cents per hour
for the first 40 hours of any workweek, and not less than one and
one-half times such basic hourly rate of pay for all time over 40
hours in any workweek, with a guarantee that Employee shall receive
for regular time and for such overtime as the necessities of the
business may demand a sum not less than $[a specified number] for
each workweek. [
Footnote
3]"
The regular basic rate so specified was in each case at or above
the minimum prescribed by the Act or by the Administrator's order,
but that rate was always so related to the guaranteed flat sum that
the employee became entitled to more than the guarantee only in
weeks in which he worked more than 84 hours. [
Footnote 4] The compensation
Page 331 U. S. 20
actually paid was regularly consistent with the contractual
obligation as stated.
Petitioner sued respondent under § 17 of the Act to enjoin
against future adherence to this plan, on the ground that it failed
to include overtime compensation as required by § 7(a). He
contended that the actual "regular rate" of compensation payable
under these contracts was not the specified basic rate, but rather
the quotient of the amount of the correlative guarantee divided by
the number of hours worked in that week. This was said to follow
from the fact that the employees usually worked less than 84 hours
a week, and nevertheless received the full guaranteed sum.
The District Court found, however, that the contracts were
"
bona fide," and that "they were intended to, and did,
really fix the regular rates" at which the men were employed. It
denied relief, [
Footnote 5] and
the Circuit Court of Appeals affirmed, [
Footnote 6] both Courts relying on our decision in the
Belo case.
Petitioner admits a close similarity of facts and of his basic
contentions in this and the
Belo case. He argues, however,
that the
Belo decision should not be followed: (a) because
there are factual differences between the two cases adequate to
distinguish them, (b) because
Belo has been implicitly
overruled by later decisions of this Court, and (c) because the
Belo decision is erroneous.
As to the first of these arguments, we note that the contracts
in
Belo and in this case are substantially identical,
except for the amount of the hourly rate and of the fixed
guarantee. Under the
Belo contract, however, overtime
would be paid in addition to the guaranteed wage after 54 1/2 hours
had been worked in any given week; [
Footnote 7] under
Page 331 U. S. 21
this contract, only after 84 hours. It is said that this 84
hours bears no relation to the usual workweek.
Actually, the employees in this case have no usual workweek. In
many weeks, they work more than 100 hours; in others, less than 30.
In about 20 percent of the workweeks, they work in excess of 84
hours. [
Footnote 8] Whenever
they do, they are paid in accordance with the contract on the basis
of the specified hourly rate with appropriate overtime.
No more can be said as to the relation between 54 1/2 hours and
the usual workweek in
Belo. It appears from the record in
that case that the employees there involved also worked fluctuating
workweeks, and that the average workweek was substantially less
than 54 1/2 hours. Indeed, it appears that the
Belo
employees exceeded 54 1/2 hours in considerably less than 20
percent of the weeks worked. [
Footnote 9] When they did so, they too were paid at the
contractual rate with appropriate overtime. [
Footnote 10] There is nothing here to suggest
different treatment of the two cases.
Petitioner also points to alleged differences in the fact that
respondent in this case paid the full weekly guarantee
Page 331 U. S. 22
given when its employees worked less than 40 hours in the week,
and the fact that respondent carried fixed, rather than
fluctuating, overtime rates on its payroll records.
As to the first of these points, there is actually no difference
between this case and
Belo. The employees in both cases
had a contractual right to the full guarantee however short their
workweek, and those in
Belo were paid it as well as those
here. [
Footnote 11] The
second fact we think without significance. The function of the
payroll records was merely to show the amounts of compensation
payable. These records did not affect respondent's contract
obligations nor suggest a practice at variance with the
contract.
We think that whatever differences exist between this case and
Belo are without substance, and that it must either be
followed or overruled.
This brings us to petitioner's second argument, in which our
attention is directed to three cases decided since
Belo,
wherein we held that certain plans of overtime compensation failed
to meet the § 7(a) requirement. It is urged that the provisions for
overtime compensation in these cases were legally no less adequate
than, and that the principles on which they were decided are
necessarily inconsistent with, the overtime provision and the
principles of the
Belo case.
In
Belo itself, the specified basic hourly rate was
held to be the actual regular rate because, as to weeks in which
employees worked more than 54 1/2 hours, the specified rate
determined the amount of compensation actually payable; as to weeks
in which they worked less, the Court inferred from the collateral
specification of a basic rate and provision for a legal but
variable rate of overtime pay that the guaranteed flat sum then due
also contemplated
Page 331 U. S. 23
both basic pay and overtime. [
Footnote 12] On the other hand, we find that in the three
later cases relied on by petitioner, the agreed method by which
wages were computed made a like inference impossible.
In
Walling v. Helmerich & Payne, Inc., 323 U. S.
37, we considered a "split-day plan," under which a
prescribed "regular" hourly rate was payable for the first four
hours of each eight-hour shift, and a prescribed "overtime" rate,
of one and one-half the "regular" rate, was payable for the other
four hours. [
Footnote 13] In
those weeks in which an employee worked statutory overtime, he was
paid at the contract "overtime" rate for many straight-time hours
and at the contract "regular" rate for many overtime hours.
Obviously, these prescribed rates were not actual regular and
overtime rates, although so named in the plan. Consequently, as in
Overnight Motor Transp. Co. v. Missel, 316 U.
S. 572, we held that the regular rate was to be
determined by dividing the wages actually paid by the hours
actually worked. In so deciding, we expressly noted that
Belo was not controlling, because the wage plans involved
in the two cases posed entirely different questions as to the
application of § 7(a). [
Footnote
14]
Page 331 U. S. 24
In
Walling v. Youngerman-Reynolds Hardwood Co.,
325 U. S. 419, and
Walling v. Harnischfeger Corp., 325 U.
S. 427, the contracts established two alternative
methods for computing each employee's wages. One was to multiply
his straight-time hours of work by a specified basic hourly rate,
and his overtime hours by one and one-half that rate, and add the
products. The other was to multiply the number of jobs done by a
specified piecework rate. The employee was entitled to be paid the
greater of these two sums. [
Footnote 15] The method of computing the amount due at
piece-work rates, which were constant for work done on both
straight-time and overtime hours, of course, negated any possible
inference that the payment of such amount contemplated legal
overtime compensation. The specified hourly rates were so low,
however, relative to piecework rates, that the latter were always,
or almost always, determinative of the wage actually to be paid.
These cases held merely that such specified hourly rates were not
the "regular" rates of wage payments to which they were not
related, and which were
Page 331 U. S. 25
computed according to a necessarily inconsistent method. Again,
Belo was expressly distinguished. [
Footnote 16]
Indeed, it would seem that the Court's opinions in these cases,
far from undermining
Belo, showed an affirmative concern
that language appropriate to the situations then before us should
not be extended to the different situation involved in this and the
Belo case.
Finally, petitioner maintains that
Belo was wrongly
decided, and that we should "define the area of [its] continued
vitality, if any." His argument on this score is substantially the
same as that advanced on behalf of the Administrator and considered
by the Court in the
Belo case itself.
The reasons stated in the
Belo opinion for rejecting
this argument are equally valid today, and need not be repeated.
Moreover, our holding in
Belo has been a rule of decision
in this Court for five years, and recognized as such on each
appropriate occasion. Knowing of the
Belo decision, the
Congress has permitted § 7(a) to stand unmodified, and the courts
have applied it as so construed. Employers and employees (including
those involved in this case) have regulated their affairs on the
faith of it.
Page 331 U. S. 26
Even if we doubted the wisdom of the
Belo decision as
an original proposition, we should not be inclined to depart from
it at this time.
Affirmed.
[
Footnote 1]
52 Stat. 1060, 29 U.S.C. § 201
et seq. The relevant
overtime provisions, contained in § 7(a), 29 U.S.C. § 207(a), are
as follows:
"No employer shall, except as otherwise provided in this
section, employ any of his 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 2]
This Court decided the
Belo case June 8, 1942.
[
Footnote 3]
Compare the almost identical wording of the
Belo
contract, 316 U.S. at
316 U. S.
628.
[
Footnote 4]
For instance, the lowest specified basic rate in May, 1944, when
this case was tried, was 40 cents an hour. Compensation at this
rate for 40 hours and at one and one-half this rate for 44
additional hours equals $42.40. Actually, the correlative weekly
guarantee was the slightly greater sum of $42.69.
[
Footnote 5]
57 F. Supp. 408.
[
Footnote 6]
152 F.2d 622.
[
Footnote 7]
See the statement and explanation of the
Belo
contract, 316 U.S. at
316 U. S.
627-629.
[
Footnote 8]
The record shows that, of 4,284 man-weeks worked by respondent's
California field employees between July 5, 1942, and March 11,
1944, about 3% were less than 20 hours in length, about 13% were
less than 40 hours, about 67% were from 40 to 84 hours, about 20%
were over 84 hours, and about 7% over 104 hours, some running as
high as 140 and 150 hours. This "work-week" was the basis for
determining compensation, but it did not represent the number of
hours actually worked by the employee. In the course of typical
cementing and testing operations, many hours counted as working
time were spent waiting while the drilling crew was running the
casing, the cement was setting, the perforation work was being done
by another company, or the testing tool was standing in the well
hole.
[
Footnote 9]
See Transcript of Record, Supreme Court of the United
States,
Walling v. A. H. Belo Corp., No. 622, O.T. 1941,
pp. 194-337.
[
Footnote 10]
316 U.S. at
316 U. S.
631-632.
[
Footnote 11]
Fleming v. Belo Corp., 121 F.2d 207 at 210, note 6.
[
Footnote 12]
316 U.S. at
316 U. S.
631-632. In
Overnight Motor Transp. Co. v.
Missel, 316 U. S. 572,
decided the same day as
Belo, the employees also worked an
irregular number of hours each week, but were simply paid a fixed
weekly wage. The Court noted the absence of any agreement between
the contracting parties for the payment of a specified rate an
overtime, and of any contractual limitation on the number of hours
the employee could be required to work for the fixed wage. It also
noted that these factors were not absent from the
Belo
plan.
See 316 U.S. at
316 U. S.
581.
[
Footnote 13]
Theoretically, when an employee had so accumulated 40 "regular"
hours in one week, all subsequent hours were compensable as
"overtime." Actually, no employee ever did so.
See 323
U.S. at
323 U. S.
41.
[
Footnote 14]
"Nothing in this Court's decision in
Walling v. Belo Corp.,
supra, sanctions the use of the split-day plan. The
controversy there centered about the question whether the regular
rate should be computed from the guaranteed weekly wage or whether
it should be identical with the hourly rate set forth in the
employment contract. There was no question, as here, pertaining to
the applicability of the regular rate to the first 40 hours
actually and regularly worked, with the overtime rate applying to
all hours worked in excess thereof."
Walling v. Helmerich & Payne, Inc., 323 U. S.
37, at
323 U. S.
42.
[
Footnote 15]
In the
Harnischfeger case, the scheme was actually a
little different from that in the
Youngerman-Reynolds
case, which is stated in the text. In
Harnischfeger, the
employee was credited with (a) the product of the total number of
hours worked multiplied by the basic rate, plus (b) the amount by
which piecework earnings during all hours worked exceeded the
product in (a), plus (c) the product of the number of overtime
hours worked multiplied by one-half the basic hourly rate. The
difference is that, in
Harnischfeger, some provision was
made for overtime; but in both cases the provision for overtime was
inadequate, and for the same reason.
See 325 U.S. at
325 U. S.
431-432.
[
Footnote 16]
"This Court's decision in
Walling v. A. H. Belo Corp.,
316 U. S.
624, lends no support to respondent's position. The
particular wage agreements there involved were upheld because it
was felt that in fixing a rate of 67 cents an hour the contracts
did, in fact, set the actual regular rate at which the workers were
employed. The case is no authority, however, for the proposition
that the regular rate may be fixed by contract at a point
completely unrelated to the payments actually and normally received
each week by the employees."
Walling v. Youngerman-Reynolds Hardwood Co.,
325 U. S. 419, at
325 U. S.
426.
See also the concurring opinion of MR. JUSTICE
FRANKFURTER in
Walling v. Harnischfeger Corp.,
325 U. S. 427,
325 U. S. 433.
The Court did not expressly refer to
Belo in its opinion
in the
Harnischfeger case; but, as it did in
Youngerman-Reynolds, which involves substantially the same
question and was decided the same day, we consider that further
reference to
Belo would have been redundant.
MR. JUSTICE RUTLEDGE.
I concur in the Court's judgment upon the authority of
Walling v. Belo Corp., 316 U. S. 624. I
agree with MR. JUSTICE MURPHY that the
Belo decision is
inconsistent with later decisions here in the view it takes
concerning the legal effects of the Fair Labor Standards Act. But
those cases are distinguishable upon their facts; the
Belo
case has been relied upon by the parties to this cause, and no
doubt also by others, in making their arrangements, and the facts
here seem to me indistinguishable from those covered by the
Belo decision. Accordingly, although I would restrict the
effects of that decision narrowly to the factual situation
presented, I join in the judgment now rendered.
MR. JUSTICE MURPHY, with whom MR. JUSTICE BLACK concurs,
dissenting.
It is conceded that the weekly guaranty was sufficient to pay
for 40 hours at the so-called "regular basic rate" and for 44
additional hours at one and one-half times such "basic hourly
rate." The contract overtime rate became effective only as to those
hours of work in excess of 84. In other words, the "regular basic
rate" referred to in the contracts had no meaning or effect
whatsoever unless the employee worked more than 84 hours in a week.
Whether he worked 20 hours, 40 hours, or 60 hours in a week, he was
paid the guaranteed amount.
To square such a wage scheme with the plain requirements of §
7(a) of the Fair Labor Standards Act of 1938 is impossible. Time
and again, this Court has made it clear that the regular rate of
compensation upon which
Page 331 U. S. 27
overtime payments are to be based is the hourly rate actually
paid to the employee for the normal, nonovertime workweek for which
he is employed.
Overnight Motor Trans. Co. v. Missel,
316 U. S. 572,
316 U. S. 580;
Walling v. Helmerich & Payne, 323 U. S.
37,
323 U. S. 40;
United States v. Rosenwasser, 323 U.
S. 360,
323 U. S. 363;
Walling v. Youngerman-Reynolds Hardwood Co., 325 U.
S. 419,
325 U. S. 424;
Walling v. Harnischfeger Corp., 325 U.
S. 427,
325 U. S.
430.
"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., supra, at
325 U. S.
424-425.
Our attention in this case must therefore be focused upon the
actual payments, exclusive of those paid for overtime, which the
parties have agreed shall be paid during each workweek. And, when
we do that, we discover that the parties have agreed that the
employees shall receive the guaranteed amount, not the so-called
"regular basic rate." That guaranteed amount is thus the regular
rate for purposes of § 7(a) of the Act, the so-called "regular
basic rate" being an obviously artificial one.
It is said, however, that this scheme is sanctioned by
Walling v. Belo Corp., 316 U. S. 624.
That is true, but it does not justify continuance of the erroneous
Belo doctrine. The
Belo case has been
distinguished in subsequent opinions of this Court, but the
distinctions were essentially ones of fact. On the basis of legal
and statutory theory, the
Belo case is irreconcilable with
the later
Page 331 U. S. 28
cases. The
Belo case, which carries its own refutation
in its dissenting opinion, should therefore be overruled.
Otherwise, we shall be perpetuating and augmenting the unrealities
and confusion which have marked the application of the doctrine of
that case.
See Feldman, "Algebra and the Supreme Court,"
40 Ill.L.Rev. 489; "Legality of Wage Readjustment Plans under the
Overtime Provision of the Fair Labor Standards Act," 13 U. of
Chi.L.Rev. 486; 44 Mich.L.Rev. 866.