1. Nothing in the Fair Labor Standards Act bars an employer from
contracting with his employees to pay them the same wages that they
received previously, so long as the new rate equals or exceeds the
minimum required by the Act. P.
316 U. S.
630.
2. An employer whose employees worked irregular hours and were
paid fixed weekly salaries entered into contracts with them,
individually, which, in each case, specified a basic rate of pay
per hour, for the maximum hours fixed by the Act, 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 an amount specified. Under this
plan, the employee worked more than the statutory maximum regular
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,"
or contract, rate. His compensation equalled or approximated that
which he was receiving when the Act went into effect, and exceeded
the
minima which the Act prescribes.
Held:
Page 316 U. S. 625
(1) That the rate per hour so agreed on was the "regular rate"
within the meaning of § 7(a)(3) of the Act where it provide that,
for overtime, the employee shall receive compensation "at a rate
not less than one and one-half times the regular rate for which he
is employed." P.
316 U. S.
630.
(2) The intention of the parties to fix the amount per hour
specified in the contract was consistent with their intention to
guaranty the specified weekly income. P.
316 U. S.
631.
(3) The Act does not prohibit paying more for overtime than 150%
of the basic rate. P.
316 U. S.
632.
(4) The contract conforms to the intention of the Act.
Overnight Motor Transportation Co. v. Missel, ante, p.
316 U. S. 572,
distinguished. P.
316 U. S.
634.
121 F.2d 207 affirmed.
Certiorari, 314 U.S. 601, to review the affirmance of a decree
of the Circuit Court of Appeals which dismissed a bill brought by
the Administrator of the Wage and Hour Division, Labor Department,
to enjoin the respondent from adhering to a wage system, based upon
contracts with its employees, which plaintiff attacked as contrary
to wage and hour provisions of the Fair Labor Standards Act. In the
District Court, this case was tried with another in which the
present respondent obtained a declaratory judgment against certain
of its employees.
See 35 F.
Supp. 430, 36 F. Supp. 907.
MR. JUSTICE BYRNES delivered the opinion of the Court.
This is a proceeding by the Administrator of the Wage and Hour
Division of the Department of Labor to restrain the respondent
corporation from alleged violation of the
Page 316 U. S. 626
Fair Labor Standards Act. [
Footnote 1] The Administrator sought to prevent the use by
respondent under certain contracts with its employees of wage
agreements deemed by the Administrator violative of the time and a
half for overtime provisions of section 7(a), [
Footnote 2] as implemented by section 15(a)(1) and
(2). [
Footnote 3]
Page 316 U. S. 627
The respondent, a Texas corporation, is the publisher of the
Dallas
Morning News and other periodicals, and the owner
and operator of radio station WFAA. It has some 600 employees.
Those in the mechanical departments work under a collective
bargaining agreement, and are not involved in the present dispute.
The others, and particularly those in the newspaper business, work
irregular hours. Prior to the effective date of the Act, October
24, 1938, respondent had been paying all but two or three of these
employees more than the minimum wage required by the Act. They
received vacations of approximately two weeks each year at full
pay; special bonuses at the end of the year amounting to
approximately one week's earnings, and full pay during periods of
illness, sometimes continuing for weeks and sometimes for months.
At the time of the trial, 28 superannuated employees were carried
on the payroll at full rates of pay. Employees were permitted
absences to attend to personal affairs without deductions from pay.
When they were required to work long hours in any week, they were
given compensating time off in succeeding weeks. Life insurance was
carried for them at respondent's expense.
After the enactment of the Fair Labor Standards Act, but before
its effective date, respondent endeavored to adjust its
compensation system to meet the requirements of the Act by
negotiating a contract with each of its employees except those in
the mechanical departments. These contracts were in the form of
letters stating terms which were agreed to by the employees. The
following is a typical letter:
Page 316 U. S. 628
"The Fair Labor Standards Act which goes into effect on October
24, 1938, provides for the following minimum wages and maximum
hours of employment:"
"First year -- 25� per hour minimum 44 hours maximum per
week"
"Second year -- 30� per hour minimum 42 hours maximum per
week"
"Third year -- 40� per hour minimum [
Footnote 4] 40 hours maximum per week"
"except that employees may work more than the number of hours
specified above, provided that overtime rates shall be a minimum of
one and one-half times the basic rate."
"In order to conform our employment arrangements to the scheme
of the Act without reducing the amount of money which you receive
each week, we advise that, from and after October 24, 1938, your
basic rate of pay will be . . . 67 . . . cents per hour for the
first forty-four hours each week, and that, for time over
forty-four hours each week, you will receive for each hour of work
not less than one and one-half time such basic rate above
mentioned, with a guaranty on our part that you shall receive
weekly, for regular time and for such overtime as the necessities
of the business may demand, a sum not less than . . . $40. . .
."
In most cases, as in this example, the specified hourly rate was
fixed at 1/60th of the guaranteed weekly wage. The result was that,
during the first year under the Act, when the statutory maximum of
regular hours was 44, the employee was required to work 54 1/2
hours before he became entitled to any pay in addition to the
weekly guaranty. [
Footnote
5]
Page 316 U. S. 629
When the employee worked enough hours at the contract rate to
earn more than the guaranty, the surplus time was paid for at the
rate of 150% of the hourly contract wage. If the employee received
an increase in pay, the hourly rate and weekly rate were
readjusted.
For eighteen months, the system embodied in these contracts was
followed to the apparent satisfaction of employer and employees.
Respondent was then advised that the arrangement was in violation
of the Act, and that it was liable to its employees in an amount of
from 30 to 60 thousand dollars. It was informed by the regional
director in Dallas and by an official in the Administrator's office
in Washington that an employee's complaint had precipitated the
investigation. These officials declined to give the name of the
employee.
Respondent thereupon brought suit for a declaratory judgment in
the District Court for the Northern District of Texas joining the
regional director and three of its employees as defendants. The
defendant employees answered that they and all the other employees
affected by the system approved of it. The regional director moved
to dismiss on two grounds, one of which was that he represented
none of the employees. The motion to dismiss was denied.
35 F. Supp.
430. In the meantime, petitioner instituted this suit to enjoin
respondent from continuing to operate the wage system based upon
its contracts with its employees. The two suits were consolidated
and tried together. The District Court entered a declaratory
judgment for the respondent, and dismissed the bill for an
injunction. 36 F. Supp. 907.
Petitioner appealed to the Circuit Court of Appeals from the
dismissal of its complaint. That Court affirmed the judgment of the
District Court. 121 F.2d 207, 210. It found that the contracts were
"actual
bona fide contracts of employment," and that "they
were intended to, and did, really fix the regular rates at which
each employee was
Page 316 U. S. 630
employed." We granted certiorari because of the importance of
the question in the administration of the Act. 314 U.S. 601.
It is no doubt true, as petitioner contends, that the purpose of
respondent's arrangement with its employees was to permit, as far
as possible, the payment of the same total weekly wage after the
Act as before. But nothing in the Act bars an employer from
contracting with his employees to pay them the same wages that they
received previously, so long as the new rate equals or exceeds the
minimum required by the Act. [
Footnote 6]
The Act requires that, for each hour of work beyond the
statutory maximum, the employees must be paid "not less than one
and one-half times the regular rate at which he is employed." This
case turns upon the meaning of the words "the regular rate at which
he is employed." Respondent
Page 316 U. S. 631
contends that the regular rate under the illustrative contract,
which is set out above and to which we shall refer throughout, is
67 cents an hour. Petitioner argues, however, that the 67 cents
hourly rate mentioned in the contract is meaningless, and that the
agreement is, in effect, for a weekly salary of $40, without regard
to fluctuations in the number of hours worked each week. Treating
the contract as one for a fixed weekly salary, he urges that the
regular hourly rate for any single week is the quotient of the $40
guaranty divided by the number of hours actually worked in that
week. [
Footnote 7] Under this
formula, the employee is entitled to the regular hourly rate thus
determined for the first 44 hours [
Footnote 8] each week, and to not less than one and
one-half times that rate for each hour thereafter.
In its initial stage, the question to which this dispute gives
rise is a question of law -- a question of interpretation of the
statutory term "regular rate." But it is agreed that, as a matter
of law, employer and employee may establish the "regular rate" by
contract. In the case before us, such an effort has been made, and,
in the example given, the regular rate has been specified as 67
cents an hour. The difficulty arises from the inclusion of the $40
guaranty. The problem is whether the intention of the parties to
set 67 cents an hour as the regular rate squares with their
intention to guarantee a weekly income of $40. The Administrator's
position is that these two objectives are inherently inconsistent,
and that the intention to fix the regular hourly rate at 67 cents
is overridden by the intention to guarantee the $40 per week.
We cannot agree. In the first place, when an employee works more
than 54 1/2 hours in a single week, he is admittedly entitled to
more than the $40 guarantee. The record
Page 316 U. S. 632
shows that, in such a case, the employee is paid at the rate of
$1.00 an hour (150% x $.67) for each hour of overtime. In this
situation, then, it is clearly the guaranty that becomes
inoperative, and the 67 cent hourly rate fixed by the contract that
is controlling.
In the second place, although it is perfectly true that, when
the employee works less than 54 1/2 hours during the week, his pay
is determined by the $40 guaranty, it does not dispose of the
problem simply to say this. The question remains whether the $40
contemplates compensation for overtime, as well as basic pay. The
contract says that the employee is to receive 67 cents an hour for
the first 44 hours, and "not less than one and one-half time such
basic rate" for each hour over 44. Consequently, if an employee
works 50 hours in a given week, it might reasonably be said that
his $40 wage consists of $29.48 for the first 44 hours (44 x $.67)
plus $10.52 for the remaining six hours (6 x $1.753). To be sure,
$1.753 is more than 150% of $.67. But the Act does not prohibit
paying more; it requires only that the overtime rate be "not less
than" 150% of the basic rate. It is also true that, under this
formula, the overtime rate per hour may vary from week to week. But
nothing in the Act forbids such fluctuation.
The gist of the Administrator's objection to this interpretation
is that both the basic rate and the overtime rate are so
"artificial" that the parties to the contract cannot fairly be
supposed to have intended that it be so construed. It cannot be
denied that the flexibility of the overtime rate is considerable,
but this flexibility may well have been intended if it was the only
means of securing uniformity in weekly income. Moreover, under the
Administrator's interpretation, the regular rate in the example
given is $40 divided by the number of hours worked each week. Since
the number of hours worked fluctuates so drastically from week to
week, this "regular" rate is certainly "irregular" in a
mathematical sense. And, inasmuch as it cannot be
Page 316 U. S. 633
calculated until after the workweek has been completed, it is
difficult to say that it is "regular" in the sense that either
employer or employee knows what it is or can plan on the basis of
it.
The artificiality of the method urged by the Administrator is
accentuated by the nature of his counterproposal of two plans by
which the weekly wage of an employee whose hours vary from week to
week may be stabilized. One of these officially approved plans is
known as the "time-off plan," and is explained in Interpretative
Bulletin No. 4. Under this plan, the employment must be placed upon
an hourly rate basis, with no mention of a guaranty. The paydays
must be spaced at intervals of two weeks or longer. If the pay
period is set at two weeks and the employee is required to work
overtime during the first week, he is given sufficient time off
during the second week to keep his paycheck at a constant level. In
our view, this counterproposal far exceeds in technicality the plan
adopted by respondent. Moreover its operation is to provide a
ceiling, but not a floor, for the wage. Since the pay is by the
hour and there is no guaranty, in a pay period in which an employee
works few hours, his wage may fall far below the level aimed
at.
The other officially approved arrangement is known as the
"prepayment plan," and is also explained in Bulletin No. 4. Under
this plan, virtually the same arrangement as that which we have
been using as an example can stand. That is to say, an employee may
be promised 67 cents an hour for the first 44 hours, $1.00 for each
hour over 44, [
Footnote 9] with
a guaranty of $40 a week. However, in any week in which the
employee's earnings at the stated hourly rates do not equal the $40
guaranty, the balance necessary to fulfill the guaranty must be
treated as a loan to him. If,
Page 316 U. S. 634
in any succeeding week, his earnings at the stated hourly rates
exceed the guaranty, the excess is withheld by the employer as a
repayment of the loan. But if his earnings do not exceed the
guaranty in any succeeding week, and, after receiving his paycheck,
he does not return to work, the employer is presumed to make an
effort to collect the excess amount paid to the employee in a
previous week. If the employer does not recover this excess amount,
then, for all practical purposes, the plan operates just as does
the plan followed by the respondent in this case. About the only
difference is that one is called a "guaranty plan," while the other
is called a "prepayment plan." In the opinion of the Administrator,
the "prepayment plan" is lawful; the "guaranty plan" is
unlawful.
But the guaranty contract in this case carries out the intention
of the Congress. It specifies a basic hourly rate of pay and not
less than time and a half that rate for every hour of overtime work
beyond the maximum hours fixed by the Act. It is entirely unlike
the
Missel case,
ante. p.
316 U. S. 572. In
the contract in that case, there is no stated hourly wage, and no
provision for overtime. Under the decision in that case, an
employer who engages a worker for a fixed weekly wage of $40 for
irregular hours and works him 65 hours (in a year when the maximum
workweek is 44 hours) owes the employee $46.38.
See Missel
case. For the same hours under the
Belo contract at the
hourly contract rate of 67 cents, the worker would receive $50.48.
There is a difference in compensation, but that is the agreement of
the parties, and it is within the letter and the intention of the
law.
The problem presented by this case is difficult -- difficult
because we are asked to provide a rigid definition of "regular
rate" when Congress has failed to provide one. Presumably Congress
refrained from attempting such a definition because the employment
relationships to which the Act would apply were so various and
unpredictable.
Page 316 U. S. 635
And that which it was unwise for Congress to do this Court
should not do. When employer and employees have agreed upon an
arrangement which has proven mutually satisfactory, we should not
upset it and approve an inflexible and artificial interpretation of
the Act which finds no support in its text and which, as a
practical matter, eliminates the possibility of steady income to
employees with irregular hours. Where the question is as close as
this one, it is well to follow the Congressional lead and to afford
the fullest possible scope to agreements among the individuals who
are actually affected. This policy is based upon a commonsense
recognition of the special problems confronting employer and
employee in businesses where the work hours fluctuate from week to
week and from day to day. Many such employees value the security of
a regular weekly income. They want to operate on a family budget,
to make commitments for payments on homes and automobiles and
insurance. Congress has said nothing to prevent this desirable
objective. This Court should not.
Affirmed.
[
Footnote 1]
Enforcement of the requirements of the Act by injunction is
authorized by section 17.
"The district courts of the United States and the United States
courts of the Territories and possessions shall have jurisdiction,
for cause shown, and subject to the provisions of section 20
(relating to notice to opposite party) of the Act entitled 'An Act
to supplement existing laws against unlawful restraints and
monopolies, and for other purposes,' approved October 15, 1914, as
amended (U.S.C.1934 edition, title 28, sec. 381), to restrain
violations of section 15."
52 Stat. 1069, 29 U.S.C. § 217.
[
Footnote 2]
"Sec. 7. (a) 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 --"
"(1) for a workweek longer than forty-four hours during the
first year from the effective date of this section,"
"(2) for a workweek longer than forty-two hours during the
second year from such date, or"
"(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."
52 Stat. 1063, 29 U.S.C. § 207.
[
Footnote 3]
"Sec. 15. (a) After the expiration of one hundred and twenty
days from the date of enactment of this Act, it shall be unlawful
for any person --"
"(1) to transport, offer for transportation, ship, deliver, or
sell in commerce, or to ship, deliver, or sell with knowledge that
shipment or delivery or sale thereof in commerce is intended, any
goods in the production of which any employee was employed in
violation of section 6 or section 7, or in violation of any
regulation or order of the Administrator issued under section 14;
except that no provision of this Act shall impose any liability
upon any common carrier for the transportation in commerce in the
regular course of its business of any goods not produced by such
common carrier, and no provision of this Act shall excuse any
common carrier from its obligation to accept any goods for
transportation;"
"(2) to violate any of the provisions of section 6 or section 7,
or any of the provisions of any regulation or order of the
Administrator issued under section 14. . . ."
52 Stat. 1068, 29 U.S.C. § 215.
[
Footnote 4]
In later letters, this misstatement, immaterial here, was
corrected. The minimum wage for the first 40 hours remains 30 cents
until October 24, 1945.
See § 6 of the Act.
[
Footnote 5]
44 hours at 67 cents equals $29.48; 10 2/3 hours at the
statutory minimum overtime rate of $1.00 (150% x $.67) equals
$10.50; $29.48 plus $10.50 equals $39.98.
[
Footnote 6]
Section 18 provides:
"No provision of this Act shall justify any employer in reducing
a wage paid by him which is in excess of the applicable minimum
wage under this Act, or justify any employer in increasing hours of
employment maintained by him which are shorter than the maximum
hours applicable under this Act."
Whatever the legal effect of this language, it is certainly not
a prohibition, and the Administrator does not rely upon it. The
finding of the Circuit Court of Appeals that respondent's effort to
maintain the weekly incomes of its employees at their pre-Act level
was in good faith gains support from the circumstance that, at the
very time when respondent was formulating its new wage policy, the
Wage and Hour Administrator declared:
"Clerical forces, we all feel, are included in the Act. But I
cannot see where there is going to be any practical difficulty
there, because your clerical force in any plant of any consequence
certainly is earning on a basis of more than 25 cents an hour
weekly wages divided by the hours they work. If they are well above
25 cents an hour, it seems to me that there would not be much
question about time and a half for overtime, because you could
figure in that weekly wage that time and a half over the 44 hours
had been given consideration as remuneration for their full week's
pay."
Speech before the Southern States Industrial Council at
Birmingham, Alabama, on September 29, 1938. 3 Wage and Hour
Reporter 228.
[
Footnote 7]
This has been the Administrator's interpretation of the Act, as
set forth in Interpretative Bulletin No. 4, issued October 21,
1938, and revised in November, 1940.
[
Footnote 8]
For the first year after passage of the Act; now 40 hours.
[
Footnote 9]
It should be noted that respondent's contract, set out above,
does not fix $1.00 as the hourly rate for overtime. Instead, it
provides that the overtime rate shall be "not less than one and
one-half" times 67 cents.
MR. JUSTICE REED, dissenting.
The Court holds,
"When employer and employees have agreed upon an arrangement
which has proven mutually satisfactory, we should not upset it and
approve an inflexible and artificial interpretation of the Act
which finds no support in its text and which, as a practical
matter, eliminates the possibility of steady income to employees
with irregular hours."
Yet it is recognized by the Court that the validity of the
contract "turns upon the meaning of the words
the regular rate
at which he is employed,'" the phrase left undefined by Congress,
which it is said the courts also should leave undefined and
flexible. Not only does the Court's conclusion assume that the
typical Belo contract conforms to the Fair Labor Standards Act by
the provision for hourly wages and time and a half for
overtime,
Page 316 U. S.
636
but, in the opinion just announced, the Court approves this
type contract for hiring "so long as the new rate equals or exceeds
the minimum required by the Act." In so deciding, the Court gives
the phrase "regular rate" an interpretation as inflexible and
artificial as that which it condemns.
The Court's interpretation that, in the absence of bad faith,
any form of contract which assures the payment of the minimum wage
and the required overtime complies with the Act may be assumed to
be correct. But, since the overtime hours must be compensated "at a
rate not less than one and one-half times the regular rate at which
he is employed," § 7(a)(3), the regular rate cannot be left without
"definition," "flexible" or unfound for this case. And, once so
found, it must be applied to the circumstances of this litigation.
No all-inclusive definition will be attempted. The possibilities of
variation in contracts are too great. Certainly, however, the Court
does not mean to say that the employer and employee may
capriciously select a certain figure, unrelated to the wages paid,
and say "[t]hat is the regular rate of employment." Every contract
of employment is assumed, by the statute, to contain a "regular
rate," and, for each contract, it is a legal, not a factual,
conclusion. What that rate is here is the object of our inquiry.
Once determined for this case, that conclusion becomes a precedent
for other similar contracts, and so, in one sense, whether we wish
it or not, a definition to be applied in the administration of the
Act.
This Court accepts the view that the Fair Labor Standards Act
was intended not only to put a floor under wages, but also a
ceiling over hours. The limitation of hours, in turn, had two
purposes -- the spreading of work and extra compensation for
overtime, no matter how high the regular wage may be.
Overnight
Motor Transportation Co. v. Missel, ante, p.
316 U. S. 572,
316 U. S. 577.
Since overtime pay must at least equal time and a half the regular
rate, as section 7(a)
Page 316 U. S. 637
specifies, employers and employees may not be permitted to
contract in avoidance of the statutory requirement. Contracts for a
regular rate per hour conform easily to the requirements, but
contracts for compensation in other forms compel an analysis of
their terms to find the regular rate. Fixed salaries, as this Court
agrees today in
Missel's case, are to be reduced to hourly
rates on the basis of a week as the unit of time. Belo's contract
contains elements both of hourly wage and fixed weekly wage
contracts. We come, then, to this point. Are the contracts here
involved for weekly wages with variable hours, or for hourly rates
with time and a half of such rates for overtime? If the latter,
respondent contends the Act has left him free to contract with his
employees at such hourly regular rates as may be agreed upon,
limited only by the minimum wage requirements. As a court, we must
appraise the nature of these contracts, and, in my judgment, they
are agreements for weekly wages for variable hours, with a
provision for additional compensation per hour contingent upon work
in excess of an ascertainable number of hours -- the number of
hours of work required for the wages earned under the hourly wage
terms of the contract to equal the guaranty. [
Footnote 2/1] Until these hours are exceeded, the
stipulated wage per hour has no demonstrable effect.
The contracts stated they were drawn to comply with the "scheme
of the Act without reducing" weekly wages. The hourly rate was
customarily written as one-sixtieth of the weekly wages. The
overtime above the maximum hours was set at 150% of the hourly
wage, or one-fortieth of the weekly. This was then followed by a
guaranty that the employee should "receive weekly," for regular and
overtime, the former weekly wage. This guaranty was the dominating
feature of the contract. Without the guaranty, the adoption of a
low hourly rate would encounter
Page 316 U. S. 638
the full weight of employee bargaining power. The guaranty
avoids this conflict by fixing the minimum weekly wage. This
guaranty controls the weekly wage up to 54 1/2 hours of work, the
number of hours contracted for by Belo without paying more than the
fixed weekly wage. In a 54 1/2 hour week or less, the regular rate
should be the guaranty divided by the hours actually worked.
It seems obvious that the guaranty was the heart of the
arrangement. The effect of the contract in the illustrative case is
to pay 73 cents an hour for work up to 54 1/2 hours, and $1.00
(expressed in the circumlocution of time and a half 67 cents) for
overtime beyond those hours, with a guaranty that there will be $40
worth of work each week. The "basic" hourly rate, the hours
contracted for at the basic rate and the stated percentage paid for
overtime, may be varied without effect on earnings provided the
guaranty and real overtime rate are kept fixed. [
Footnote 2/2]
The employee willing, the number of hours which must be worked
to earn the guaranty can be increased by suitable adjustment of the
contract figures of hourly rate, hours contracted, and overtime
percentages. By such a
Page 316 U. S. 639
verbal device, astute management may avoid many of the
disadvantages of ordinary overtime, chief of which is a definite
increase in the cost of labor as soon as the hours worked exceed
the statutory workweek. If the intention of Congress is to require
at least time and a half for overtime work beyond a fixed maximum
number of hours (40, 42 or 44 hours), that intention is frustrated
by today's holding. Under
Missel's case, an employer who
engages a worker for a fixed weekly wage of $40 for irregular hours
and works him 54 1/2 hours a week in a year with a 44-hour maximum
owes $43.86. Under the Belo contract, the worker would receive $40.
Because there is no increase of labor cost between the statutory
maximum and the hours contracted for (54 1/2), the employer has a
financial inducement to require hours beyond the statutory
maximum.
As pointed out above, this contract is not only an agreement to
pay a fixed wage, $40.00, for variable hours up to 54 1/2, but
there is a provision for additional compensation for the hours over
the contract maximum. Where the hours worked exceed the number
necessary to entitle the employee to hourly pay under the contract,
equal in the aggregate to the guaranty, the employee is entitled to
receive his regular rate for the statutory maximum hours and 150%
of that rate for all overtime. The contracts, in most instances,
fixed the basic rate at one-sixtieth of the guaranty, but the
effect of the guaranty, in our view, is to make the regular rate of
employment for the precise number of hours necessary under the
contract to earn the guaranty the quotient of the guaranty divided
by the hours. [
Footnote 2/3]
For
Page 316 U. S. 640
the surplus hours over 54 1/2, the same regular rate continues
to be applicable. [
Footnote
2/4]
It is the guaranty which gives character to these contracts,
which determines the amount to be received by the employee under
its terms, except in the instances of work beyond 54 1/2 hours. It
is only work beyond the 54 1/2 hours which calls for extra pay from
the employer. Consequently, it seems proper to find the regular
rate of employment by using the guarantee as the dividend and the
maximum hours possible without increased contract pay as the
divisor. The objection that this permits statutory overtime pay to
be computed on contract overtime pay springs from the wording of
the contract making the guarantee cover overtime up to the 54 1/2
hours. This objection loses its force with the determination that
the guaranty fixes the quality of the contract, rather than the
so-called basic or hourly rate of pay.
The judgment of the Circuit Court of Appeals should be reversed,
and this action remanded to the District Court for further
proceedings.
MR. JUSTICE BLACK, MR. JUSTICE DOUGLAS, and MR. JUSTICE MURPHY
join in this dissent.
[
Footnote 2/1]
Cf. Carleton Screw Products Co. v. Fleming, 126 F.2d
537.
[
Footnote 2/2]
An example will illustrate the lack of significance of the other
numbers in the contract. Varying rates, hours, and overtime
percentages are substituted for those in the Belo contract quoted
in the Court's opinion.
"In order to conform our employment arrangements to the scheme
of the Act without reducing the amount of money which you receive
each week, we advise that, from and after October 24, 1938, your
basic rate of pay will be [50] cents per hour for the first [29]
hours each week, and that, for time over [29] hours each week, you
will receive for each hour of work not less than [double] time such
basic rate above-mentioned, with a guaranty on our part that you
shall receive weekly, for regular time and for such overtime as the
necessities of the business may demand, a sum not less than
$40.00."
"29 hours x $.50 = $14.50. 54.5 hours - 29 hours = 25.5 hours at
$1.00 per hour = $25.50. Time plus overtime = $40.00. Thereafter,
the employee receives $1.00 per hour."
"The same is true of a basic rate of $.60 for 36 1/4 hours and
time and two-thirds thereafter, with a guaranty of $40."
[
Footnote 2/3]
Weekly guaranty -- $40. Hours worked -- 54 2/3. Straight hourly
contract wage -- $40 � 60 = $.66 2/3. Straight contract hours --
44. 44 x $.66 2/3 = $29.33 1/3. Overtime hourly contract wage --
$1.00. Overtime contract hours -- 10 2/3. 10 2/3 x $1 = $10.66 2/3.
Total contract wage paid -- $40. Statutory regular rate -- $40 � 54
2/3 = $.732 per hour. Statutory maximum hours -- 44. 44 x $.732 =
$32.20. Statutory overtime rate -- $1.098. Statutory overtime hours
= 10 2/3. 10 2/3 x $1.098 = $11.71. Total required compensation --
$43.91.
[
Footnote 2/4]
Hours worked -- 60. Statutory maximum hours -- 44. Regular rate
-- $.732. 44 x $.732 = $32.20. Statutory overtime hours -- 16.
Overtime rate -- $1.098. 16 x $1.098 = $ 17.57. Total required
compensation -- $49.77.