1. A wage agreement entered into by direction of the National
War Labor Board providing that employees should be paid fixed
weekly wages for workweeks of specified length, in excess of 40
hours, and that the "hourly rate" was to be determined by dividing
weekly earnings by the number of hours employed plus one-half of
the number of hours actually worked in excess of 40, which actually
was applied so as to result in a scheduled workweek in excess of 40
hours without effective provision for overtime pay until employees
had completed the scheduled workweek,
held not in
conformity with the overtime pay requirements of § 7(a) of the Fair
Labor Standards Act. Pp.
331 U. S.
203-210.
2. The "hourly rate" derived from the formula prescribed in the
agreement was not the "regular rate" of pay within the meaning of
the Fair Labor Standards Act. Pp.
331 U. S.
203-210.
3.
Walling v. Belo Corp., 316 U.
S. 624, and
Walling v. Halliburton Co.,
331 U. S. 17,
distinguished. P.
331 U. S.
209.
156 F.2d 139 affirmed.
Respondents sued their employer, petitioner here, to recover
sums allegedly due them under the Fair Labor Standards Act, and
were awarded judgment in the District Court. 65 F. Supp. 385. The
Circuit Court of Appeals affirmed. 156 F.2d 139. This Court granted
certiorari. 329 U.S. 817.
Affirmed, p.
331 U. S. 210.
Judgment modified,
post, pp.
331 U. S. 210,
795.
Page 331 U. S. 200
MR. CHIEF JUSTICE VINSON delivered the opinion of the Court.
This employee suit was brought in the District Court to recover
overtime compensation, liquidated damages, and a reasonable
attorney's fee pursuant to §§ 7(a) and 16(b) of the Fair Labor
Standards Act of 1938. [
Footnote
1] Recovery was allowed in the District Court, 65 F. Supp. 385,
and that judgment was affirmed in the Circuit Court of Appeals, 156
F.2d 139. We granted certiorari to consider the
Page 331 U. S. 201
important questions presented relating to the application of the
overtime provisions of the abovementioned statute.
Respondents are service and maintenance employees who, during
the period in question, worked in a loft building owned by
petitioner 149 Madison Avenue Corporation and managed by petitioner
Williams & Co. It has been stipulated that respondents were
engaged in the production of goods for commerce. [
Footnote 2] We are here concerned with the
period of employment extending from April, 21, 1942, to December
10, 1943.
Prior to April 21, 1942, employment relations between the
petitioners and respondents were governed by a collective wage
agreement, known as the Sloan Agreement. [
Footnote 3] According to its terms, employees were paid
flat weekly wages for workweeks of specified length which, in the
case of most of the respondents, amounted to $25 for 47 hours of
weekly employment. No hourly rates were specified, nor was any
attempt made to compensate employees at the rate of time and
one-half for hours worked in excess of 40 in any week.
As the expiration date of the Sloan Agreement drew near,
negotiations between the interested parties were initiated for the
purpose of reaching agreement on a new contract. After preliminary
conferences proved fruitless, the case was certified to the War
Labor Board. That
Page 331 U. S. 202
agency stated its recommendations in a directive order issued
July 29, 1942, and on September 1, 1942, the parties entered into
the agreement in question, known as the National War Labor Board
Agreement. It had been agreed that the terms of the new contract
were to be made retroactive to April 20, 1942, the expiration date
of the Sloan agreement.
The new contract provided for a workweek of 54 hours applicable
to watchmen and a workweek of 46 hours for other regular employees.
Weekly wages were established to compensate the 54 or 46 hours of
labor which sums were stated to include both payments for the
regular hours of employment and time and one-half for the hours in
excess of 40. To derive the hourly rate from the weekly wage, the
following formula was included:
"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 of the
number of hours actually employed in excess of forty (40)
hours."
Although a literal reading of the above language might seem to
indicate the establishment of a variable hourly rate dependent upon
the number of hours actually worked in any given week, such was not
the practical construction of the parties. Instead of making use of
the number of hours actually worked, only the hours the employee
was scheduled to work and the weekly wage for such scheduled
workweek entered into the calculation of the non-overtime hourly
rate. [
Footnote 4] The hourly
rate as derived from the formula remained constant therefore
regardless of whether the employee worked the scheduled number of
hours during the week or a greater or lesser number. In effect,
the
Page 331 U. S. 203
agreement, instead of directly stating a fixed hourly rate in
terms of a stipulated amount per hour, provided a formula whereby
such a fixed hourly rate could be calculated.
Under the agreement, weekly compensation varied according to the
number of hours worked in that week. Thus, in case an employee was
unable to work all his scheduled hours due to an "excusable cause,"
he was paid at the formula rate, with the provision, however, that
six of the hours worked should be compensated as overtime
regardless of whether the total of hours actually worked was
greater or less than 40 in that week. If the employee's absence was
not excusable, he was apparently paid a sum for the week obtained
by multiplying the number of hours actually worked times the
formula rate, being given credit for overtime only in case the
number of hours worked exceeded 40. [
Footnote 5] The agreement provided that all regular
employees except watchmen should be compensated at a rate one and
three-quarters times the hourly rate derived from the formula for
hours worked in excess of 46. Watchmen were to be paid twice the
formula rate for hours worked in excess of 54. Part-time workers
employed for less than the scheduled workweek were hired at a
specified schedule of hourly rates obtained by dividing the weekly
wage paid the regular employees by the number of hours in the
regular workweek.
It was not the purpose of Congress in enacting the Fair Labor
Standards Act to impose upon the almost infinite
Page 331 U. S. 204
variety of employment situations a single rigid form of wage
agreement.
Walling v. Belo Corp., 316 U.
S. 624. Section 7(a) of the Act requires, however, that
any wage agreement falling within its purview must establish an
hourly "regular rate" not less than the statutory minimum and
provide for overtime payments of at least one and one-half times
the "regular rate." A wage plan is not rendered invalid simply
because, instead of stating directly an hourly rate of pay in an
amount consistent with the statutory requirements, the parties have
seen fit to stipulate a weekly wage inclusive of regular and
overtime compensation for a workweek in excess of 40 hours, and
have provided a formula whereby the appropriate hourly rate may be
derived therefrom. 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.
We have held that the words "regular rate," while not expressly
defined in the statute, ". . . mean the hourly rate actually paid
for the normal, non-overtime workweek."
Walling v. Helmerich
& Payne, Inc., 323 U. S. 37,
323 U. S. 40.
The regular rate is thus an "actual fact," and in testing the
validity of a wage agreement under the Act, the courts are required
to look beyond that which the parties have purported to do.
Walling v. Youngerman-Reynolds Hardwood Co., 325 U.
S. 419,
325 U. S. 424.
It is the contention of the respondents that the rate derived by
the use of the contract formula was not the regular rate of pay;
that the regular rate actually paid was substantially that obtained
by dividing the weekly wage payable for the working of the
scheduled workweek by the number of hours in such scheduled
workweek, and that consequently the plan made no adequate provision
for overtime
Page 331 U. S. 205
compensation until employees regularly hired as watchmen had
worked a total of 54 hours in one week and until other regular
employees had worked a total of 46 hours. We believe that the
record provides ample support for that view.
Thus, in determining a schedule of hourly rates payable to
part-time workers employed less than 40 hours a week, no use
whatsoever was made of the hourly rate derived from the formula.
Part-time workers were paid a rate determined by dividing the
weekly wage paid to the regular employees by the number of hours in
the regular workweek, despite the fact that, according to the terms
of the formula, the weekly wage included both regular and overtime
pay. Insofar as part-time workers were concerned, the agreement
clearly indicated an intention to compensate an hour's labor by
payment of a
pro rata share of the weekly wage.
Nor was there consistent application of the hourly rate as
determined by the formula to the work of regular employees hired
for a full 46-hour week. Where such an employee was absent for an
"excusable cause," his weekly compensation was not determined by
multiplying the formula rate by the hours worked. Rather, six of
the hours the employee worked were always treated as overtime and
compensated at the rate of one and one-half times the formula rate
regardless of the total hours actually worked, thus resulting in
average hourly compensation considerably in excess of the formula
rate. The payment of "overtime" compensation for non-overtime work
raises strong doubt as to the integrity of the hourly rate upon the
basis of which the "overtime" compensation is calculated.
Cf.
Walling v. Helmerich & Payne, Inc., supra. While the
average hourly rate actually received by the employee in this
situation was not precisely that which would have resulted from
dividing the weekly wage by 46, it ordinarily approached that
figure much more closely
Page 331 U. S. 206
than it did the so-called hourly rate established by the
formula. [
Footnote 6] This
method of payment reveals further evidence of an attempt to pay a
pro rata share of the weekly wage for an hour's labor
regardless of the number of hours worked up to 46.
The agreement provided that hours worked in excess of the
scheduled 46-hour week should be compensated at the rate of one and
three-quarters of the formula rate. [
Footnote 7] While the formula rate seems to have been
consistently applied in such situations, it is significant to
observe that the amount received by the worker under these
circumstances approximates very closely that which he would have
received had he been paid an hourly rate determined by dividing the
weekly wage payable for the scheduled workweek by 46 with payment
of time and one-half for hours worked in excess of 46. [
Footnote 8] This approximation was
Page 331 U. S. 207
not fortuitous. In the directive order of the National War Labor
Board, the origin and purpose of these provisions are discussed,
and the following statement is made:
"Overtime over forty-six (46) hours is paid at a rate of time
and three-quarters in an effort approximately to equal
the
overtime to which an employee would ordinarily be entitled if it
were computed on the basis of time and a half over a forty-six
(46)-hour week. [
Footnote
9]"
Petitioners have argued that none of these provisions provides a
conclusive demonstration that the formula rate was not the actual
regular rate of pay. It is said that part-time employees were paid
a pro-rata hourly rate, since they had no opportunity to earn
overtime compensation; that the method of paying regular employees
in case of excusable absences was merely a laudable effort on the
part of the employee to compensate more fully than the Act requires
when an employee failed to work his scheduled week because of
illness or like causes, and that the time and three-quarters
provision represented an additional premium for employees called
upon to work hours
Page 331 U. S. 208
substantially in excess of the non-overtime week. We cannot
ignore the fact, however, that the agreement on its face fails to
provide for the consistent application of the formula rates in
those situations where such rates should be expected to control.
These deviations take on additional significance when it is
observed that, in every situation, with the relatively unimportant
exception of that involving unexcused absences, [
Footnote 10] the amount paid was either
precisely or substantially that which employees would have been
paid had the contract called for employment on a straight 46 hour
week with payment of time and one-half only for hours worked in
excess of 46.
Further light is thrown upon the nature of the wage agreement by
a consideration of the plan in actual operation. During the period
between April 21 and September 1, 1942, when the contract in
question was the subject of negotiation, it was understood that the
old Sloan Agreement should remain in effect, but that the terms of
the new contract should be given retroactive application to April
20. The Sloan Agreement provided for a minimum wage of $25 for a
workweek of 47 hours, with no provision for overtime for hours
worked in excess of 40. It is obvious, therefore, that, between the
above-mentioned dates, the employees were paid on a basis clearly
repugnant to the requirements of § 7(a) of the Fair Labor Standards
Act. Petitioners urge, however, that, by making the retroactive
payments as required by the agreement, any illegality in the method
of payment during the period of negotiations was eliminated. But,
in attempting to satisfy the retroactive liability, petitioners
completely ignored the formula rates, and paid each of the
respondents $2.50 for each week worked during the period,
representing the increase in the minimum weekly wage for the
scheduled workweek established by the new agreement,
Page 331 U. S. 209
without attempting further adjustment. Petitioners admit
that
"Undoubtedly some employees who worked no overtime in certain
weeks were overpaid; other who worked beyond the scheduled workweek
of 47 hours then prevailing may not have been paid enough."
It is apparent that the amount of wages paid the respondents for
work performed during the period of negotiations was in no sense
determined by application of hourly rates derived from the formula.
[
Footnote 11]
The parties have called our attention to much other evidence
which, it is asserted, reveals the practical construction given to
the terms of the agreement in question. We do not feel that it is
necessary to review these matters at length. It is sufficient to
state that, after considering the terms of the agreement and the
operation of the plan in actual practice, we have come to the
conclusion that the agreement in this case was one calling for a
workweek in excess of 40 hours without effective provision for
overtime pay until the employees had completed the scheduled
workweek, and that the "hourly rate" derived from the use of the
contract formula was not the "regular rate" of pay within the
meaning of the Fair Labor Standards Act. This is not a case like
Walling v. Belo Corp., supra, or
Walling v.
Halliburton Oil Well Cementing Co., 331 U. S.
17. Unlike those cases, there was here no provision for
a guaranteed weekly wage with a stipulation of an hourly rate
which, under the circumstances presented,
Page 331 U. S. 210
could properly be regarded as the actual regular rate of
pay.
We hold, for the reasons stated above, that the District Court
and the Circuit Court of Appeals properly determined that the wage
agreement in question failed to satisfy the statutory requirements.
Walling v. Helmerich & Payne, Inc., supra; Walling v.
Youngerman-Reynolds Hardwood Co., supra; Walling v. Harnischfeger
Corp., 325 U. S. 427.
Affirmed.
[
Footnote 1]
52 Stat. 1060, 29 U.S.C. § 201
et seq. Insofar as
pertinent, § 7(a) provides:
"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."
Section 16(b) provides in part:
"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. . . ."
[
Footnote 2]
Petitioners have raised no objection as to the amount of the
recovery allowed the respondents by the District Court if it be
assumed that the lower courts otherwise correctly determined their
liability.
[
Footnote 3]
The Sloan Agreement was negotiated between the Realty Advisory
Board on Labor Relations, Incorporated, as agent for various owners
of loft, office and apartment buildings located in the Borough of
Manhattan in the City of New York, and Local 32-B of the Building
Service Employees International Union on behalf of its members. The
same parties negotiated the agreement in question.
[
Footnote 4]
In case of an employee hired for a regular 46-hour week at a
weekly wage of $27.50, the "hourly rate" was derived from the
formula by means of the following calculation: $27.50 � [46 + 1/2
(46 - 40)] = $ .561 per hour. In effect, the formula rate is
obtained not by dividing the weekly wage by 46, the number of hours
scheduled to be worked, but by dividing that sum by 49, a divisor
determined by the formula. In the case of a watchman hired for a
54-hour week at the same weekly wage, the formula rate was
determined by this calculation: $27.50 � [54 + 1/2 (54 - 40)] = $
.4508 per hour.
[
Footnote 5]
The agreement made no specific provision for situations
involving unexcused absences. The above-described procedure seems
to have been applied in practice, however.
[
Footnote 6]
Thus, the employee Anderson worked only 39 hours in the week of
Feb. 14, 1943, the 7 hours of absence apparently being due to an
"excusable cause." Under the agreement, which would entitle him to
six hours of "overtime" pay, he should have received weekly
compensation in the amount of $23.56. The actual average hourly
rate during that week accordingly would be $ .604. If Anderson had
been paid on an hourly basis determined by dividing the weekly wage
paid for a scheduled workweek by the number of hours in such
workweek, he would have received $ .598, whereas, had he been paid
the straight formula rate, he would have received $ .561 per hour.
So also, the petitioner Peterson, in the week of Dec. 13, 1942, was
absent 16 hours for excusable causes. The payroll records reveal he
earned $18.50, or an actual average hourly rate of $ .617 as
compared to $ .598, the average rate for a scheduled workweek, and
to $ .561, the formula rate.
[
Footnote 7]
In the case of watchmen, who were assigned a scheduled week of
54 hours, twice the formula rate was paid for hours worked in
excess of 54.
[
Footnote 8]
Thus, if an employee hired for a regular workweek of 46 hours at
$27.50 worked 50 hours in one week, his total weekly compensation
would amount to $31.43 if compensated in accordance with the terms
of the agreement. If, instead, the employee were hired on a
straight weekly basis at the same weekly wage with provision for
time and one-half the average hourly rate for hours worked in
excess of 46, he would receive $31.09 as total weekly compensation
for 50 hours of work. If a watchman, scheduled to work a 54 hour
week at $27.50 actually worked 58 hours, he would receive $31.11
weekly compensation if calculated according to the agreement, or
$30.55 if calculated on a straight weekly basis with time and
one-half for hours worked in excess of 54.
[
Footnote 9]
(Emphasis supplied.) The agreement in question also contained
the following provision:
"Per diem rates of pay of any employee shall be arrived at by
dividing the applicable weekly wage by the normal number of days
per week worked by that employee in the building in question."
This provision is obviously at odds with the statement in the
agreement that the weekly wage stipulated for a scheduled workweek
included both regular pay and overtime for hours worked over 40.
There is nothing in the record, however, to indicate that the
per diem provisions were actually applied. Petitioner
explains its presence in the agreement as an inadvertent holdover
from the earlier Sloan Agreement.
[
Footnote 10]
See note 5
supra.
[
Footnote 11]
A somewhat similar situation prevailed with respect to an
increase of $1.40 in the weekly wage grantee on October 10, 1943,
and made retroactive to April 21, 1943. It appears that petitioners
made some effort to make adjustments consistent with the formula in
payment to employees who had worked hours in excess of the
scheduled workweek. It is conceded, however, that no such
adjustments were made with respect to those who worked less than
their scheduled hours in weeks during the retroactive period, such
employees being paid the full weekly increase for each week
employed regardless of hours actually worked.