Statements of Messrs. John B. Lawrence and Peter T. Beardsley Representing the American Trucking Associations, Inc., October 25, 1945

Statement. Mr. Lawrence, in discussing the interpretation of the exemption provided by the present section 13(b) (1) of the act, referred to "the great amount of confusion and disastrous liability that is being visited on our industry by administrative distortion of the intent of Congress." He further stated:

"The exemption ran to those employees over whom the Interstate Commerce Commission had jurisdiction. The Interstate Commerce Commission contrary to the time honored course followed by Federal bureaucracy began to deny jurisdiction over as many classes of employees as they conveniently could. On the other hand the Wage-Hour Division moved in on the situation and grabbed control right and left, with constantly changing 'interpretations' of law which would arouse envy of many of the bureaus of the defeated Axis governments."

Mr. Beardsley's comment, while they appear to be directed chiefly to criticism of the interpretation of the exemption by the courts, including the United States Supreme Court, also refer to "so-called 'interpretations'" of the Administrator "which neither the Fair Labor Standards Act nor the Interstate Commerce Act gave him the power to make, and which he himself admits are not binding." Mr. Beardsley stated that by these interpretations, which "are constantly being revised," the Administrator "has helped to further muddle a situation which. without added mischief, was thoroughly confused already." He stated, "Of course, the all-too-often forgotten tax payer paid the bill for the Administrator's trip into legal territory not granted him by the Congress."

Comments. It is true, as I stated to the subcommittee, that the Administrator has no power to issue authoritative interpretations of general provisions of the act. On the other hand, as the Supreme Court has pointed out, the Administrator "is obliged to reach conclusions as to conduct without the law, so that he should seek injunctions to stop it, and that within the law, so that he has no call to interfere." As was stated more at length in the First Annual Report of the Administrator to Congress on page 8, these interpretations have been issued in response to public demand for information about the law and in recognition of the fact that persons subject to the law should be forwarned of the criteria necessarily adopted by the Administrator for the guidance of himself and his agents in the work of administration and enforcement.

Mr. Beardsley refers to the fact that Interpretative Bulletin No. 9 relating to the section 13(b)(1) exemption has been revised five times. As pointed out by the Supreme Court, this act, unlike some other Federal legislation, "puts upon the courts the independent responsibility of applying ad hoc the general terms of the statute to an infinite variety of complicated industrial situations" Kirschbaum v. Walling (316 U. S. 517). The Administrator's first interpretation of this exemption was made public in an interpretative bulletin and was reported to Congress in the Administrator's First Annual Report on page 24. This interpretation was based on the Administrator's best judgment after studying the legislative history of the exemption since there was at that time no judicial guidance. When the Supreme Court indicated that this interpretation was in one respect incorrect, it was, of course, changed. Such subsequent changes as have been made have likewise not been the result of administrative whim or caprice, but have been necessitated by rulings of the courts. Surely it cannot be seriously contended that Congress intended the Wage and Hour Division to be unresponsive to appellate and Supreme Court decisions interpreting this exemption, among others.

It is true that the exemption in its present form is extremely difficult to apply, and that a number of points of interpretation have not yet been finally settled by the courts. I had situations such as this in mind when I recommended to Congress that the Administrator be given power to make regulations necessary or appropriate to implement the act's provisions and to protect employers from any civil or criminal liability where they were complying with such regulations. With respect to this exemption, as I indicated to the subcommittee, the provisions of S. 1349 would serve to make its scope more definite and to eliminate what is now "no man's land" between the two acts. I believe, however, that the basic solution to the problem is not, as suggested by Mr. Beardsley, a broadening of this exemption, but is rather its elimination. Although both Mr. Lawrence and Mr. Beardsley appear to feel that this would discriminate against the trucking industry in favor of the railroads, I think it proper to mention that railroad employees who are not at present entitled to overtime under this act were, early in 1944, awarded increases in wages which included amounts approved under

the stabilization program as a wage adjustment in lieu of weekly overtime pay. I need hardly add that as a matter of principle there is merit in the suggestion that the railroad and motor carrier industries be treated identically and that I should naturally not object to elimination of the overtime exemption now available to the railroads.

Statement-Mr. Lawrence refers to litigation apparently in the case of Keeling v. Huber & Huber Motor Express, Inc., western district of Kentucky, decided January 30, 1945, as an instance in which the Wage and Hour Division "reached the high point of distortion” and was "successfully attempting, by interpretative legerdemain, to stem the progress of more than 20 years in automotive maintenance practices."

Comments. It was held in this case that employees rebuilding motor-vehicle parts to be held in stock and subsequently installed in repair operations on vehicles used in interstate commerce do not come within the exemption as employees directly affecting safety of operation of motor vehicles in interstate commerce the only employees for whom the Interstate Commerce Commission has power to prescribe qualifications and maximum hours of service (United States v. American Trucking Assns., Inc., 310 U. S. 534). In fairness I think it should be pointed out that this case arose as the result of an employee suit filed under section 16 (b) of the act and that the Division in no wise participated in such suit, although it subsequently followed the ruling laid down by the court on this point.

Statement.-Mr. Beardsley criticizes the Supreme Court's holding that overtime must be paid on the regular rate, not the statutory minimum (in Overnight Motor Co. v. Missel, 316 U. S. 572), as an instance of the usurpation of legislative power by a judicial body.

Comments. This decision of the Supreme Court supported the consistent administrative interpretation of the overtime provisions of the act, and I think it proper to point out that there is no discernible basis for Mr. Beardsley's statement that prior to this decision "it had been generally assumed that if the aggregate wages paid in any workweek equaled the minimum wage for the statutory hours plus time and one-half such minimum for all overtime, the act had been complied with." Not only was such an assumption directly contrary to the administrative interpretation contained in the Division's widely circulated Interpretative Bulletin No. 4 and in the Administrator's First Annual Report to Congress (p. 12), but, as was carefully pointed out by the Supreme Court, it was contrary to the explicit language of the act and to the legislative history. Moreover, the great majority of the Federal district and appellate courts had already indicated that such an assumption was unjustified, even before the Supreme Court passed upon the question.

Statement.-Mr. Beardsley speaks of the "conflict between the Interstate Commerce Commission and the Administrator regarding jurisdiction over employees of motor carriers," which he appears to feel results from the administrative interpretation that an employee who spends the greater part of his workweek in work which is not subject to the Commission's jurisdiction is not exempt from the overtime requirements of the act.

Comments. This position was adopted because it was believed that Congress did not intend the exemption to be available as a vehicle to exempt employees who spend the greater part of their time in work other than that which forms the basis of the exemption. It was felt that this was a reasonable position where exemption was dependent upon the jurisdiction of another Government agency. This position was adopted as a result of court decisions indicating its propriety, and has been sustained by other courts since that time. It is significant in this connection that the respect to other exemptions the courts have frequently held that the performance of any nonexempt work during a workweek is enough to defeat an otherwise applicable exemption. See, for example, Fleming v. Swift & Co. (41 F. Supp. 825, affirmed, 131 F. (2d) 249 (C. C. A. 7)); Walling v. Bridgeman-Russell Co. (6 Wage Hour Rept. 132); Sykes v. Lochmann (132 P. (2d) 620); Gaskin v. Clell Coleman & Sons (5 Wage Hour Rept. 581); Walling v. DeSoto Creamery & Produce Co. (57 F. Supp. 938); and Shain v. Armour & Co. (50 Supp. 907). I do not think the application of this principle should be considered as in conflict with the position of the Interstate Commerce Commission. While the Commission has power to establish qualifications and maximum hours of service for motor-carrier employees performing work directly affecting the safety of operation of motor vehicles in interstate commerce under the Motor Carrier Act, the Commission does not undertake to interpret the exemption pro78595-45-54

vided by section 13 (b) (1) of the Fair Labor Standards Act. No power or jurisdiction to determine the amount or percentage of work affecting safety of operation which must be performed by any employee in a workweek in order to bring him within the scope of the Fair Labor Standard Act exemption is claimed by the Commission. It is, further, our understanding that the Commission does not maintain that it has power to prescribe the qualifications which motor-carrier employees must possess while performing work which does not affect safety of operation of motor vehicles in interstate commerce or to prescribe the maximum number of hours that they may spend in work not affecting safety of operations.

Statement. Mr. Lawrence quoted criticism from one employer in the industry to the effect that our inspectors are browbeating or entrapping operators and trying to stimulate employee litigation.

Comments. I can only say that no rule of conduct for our inspectors has been more strictly laid down than that they are impartial fact finders whose job is merely to ascertain violations if they have occurred but not to lead employees to believe that they have been improperly compensated if such is not the case. Any activity of the sort described in the letter quoted in Mr. Lawrence's testimony is contrary to instruction and I should be more than glad to have the name of any inspector and the occasion on which he has allegedly so far departed from the confines of his job so that proper disciplinary action can be taken. Statement by Senator Ellender on the Effects of Increasing the Minimum Wage in the Southern Lumber Industry, October 2, 1945

Senator Ellender introduced into the record a statement purporting to show the rise in the price of lumber which would be occasioned by minimum wage rates higher than 40 cents. While it was stated that the estimates were based on cost figures of 190 sawmills in the South, an analysis of the figures given shows that the computations were made simply by applying the same percentage increase to the present ceiling price on lumber, presumably southern pine, as exists between a given minimum and 40 cents. Thus, the estimate of the total cost of lumber under a 50-cent minimum was exactly 25 percent higher than under the present 40-cent minimum, and the estimate under a 60-cent minimum was exactly 50 percent higher, et cetera.

Such a calculation fails to recognize certain basic economic facts. In the first place, labor costs are only one of a number of factors which enter into total costs of producing lumber. In 1942, for example, wages and salaries in a representative groups of southern pine mills were somewhat less than half of total prodnetion costs, and many of the other cost factors such as stumpage and depreciation would not be directly affected by an increase in the minimum. Furthermore, even the labor cost of producing lumber would not rise in direct proportion to the increase in the minimum since the vast majority of workers in the industry are currently receiving considerably more than 40 cents.

Based on a survey of the industry made by the Bureau of Labor Statistics as of August 1944, a 45-cent minimum would have required a direct labor cost increase of only seven-tenths of 1 percent for the basic lumber industry as a whole and only 1% percent for the lumber industry in the South. Thus, the rise in total costs of producing southern pine would be less than 1 percent and 121⁄2 percent as estimated in the statement submitted by Senator Ellender. Producers might well be able to absorb this small increase within the present ceiling price and thus cause no rise whatever in the price to the consumer. On the basis of the same study a 50-cent minimum wage would result in a direct labor cost increase of 4.7 percent in the southern lumber industry, 03 percent in the northern lumber industry, and less than one-tenth of 1 percent in the western lumber industry. The corresponding figures at a 55-cent minimum are 11.2 percent for the South, 1.1 percent for the North, and less than 0.1 percent for the West; at a 60-cent minimum, 18.9 percent, 2.4 percent, and less than 0.1 percent; at a 65-cent minimum, 27.3 percent, 4.9 percent, and less than 0.1 percent; at a 70-cent minimum, 36.1 percent, 8.4 percent, and less than 0.1 percent; and at a 75-cent minimum, 45 percent, 12.6 percent, and 0.1 percent. From these statistics it is apparent that even a 75-cent minimum would have virtually no effect upon the cost of producing lumber in the West, while a 65cent minimum would directly raise labor costs, which represent less than half of total costs, only 4.9 percent in the North and 27.3 percent in the South. These percentages are in sharp contrast to the estimates contained in the statement introduced by Senator Ellender that a 65-cent minimum would raise the final selling price of lumber by 62.5 percent.

As further comment on the possible effect of a 65-cent minimum in the lumber industry, I call your attention to the following excerpts from the statement presented to your committee on November 2, 1945, by Mr. Chester Bowles, Administrator of the Office of Price Administration:

"The lumber and timber industry has the next highest percentage (tobacco having the highest percentage) of workers employed at less than 65 cents an hour, namely, 54 percent. The introduction of a 65-cent minimum in this industry would increase pay rolls by $67,000,000 or 9 percent, plus a few other necessary adjustments to maintain the wage patterns. Here at first glance the possibility of absorbing the cost increase would seem somewhat more doubtful. For this increase amounts to 43 percent of the industry's 1944 profits. Yet, if we may judge by an OPA sample of 25 corporations in this industry, a reduction of 43 percent in profits would still leave them 690 percent before taxes above prewar levels and would yield a return of 10 percent on net worth, or seven times the prewar average. Prewar profits were admittedly low. But it's a dramatic example nevertheless.

"Now if, when the OPA is out of the picture, competition should operate to translate this increase in wage cost into an increase in manufacturers' prices to yield the additional $57,000,000, how much of a price increase would result? The answer is 5 percent. However, we should not forget that margins at wholesale and retail are in this field relatively wide. I can't say how much on balance would be passed on to the consumer, but certainly much less than the figure of 5 percent."

Statements Regarding the Effect of the Fair Labor Standards Act on Clothing Plants in Louisiana

I should like to take this opportunity to correct certain misimpressions which have apparently arisen in connection with the effect of the Fair Labor Standards Act on the clothing manufacturing industry in New Orleans. The assertions made during the course of the subcommittee hearings that several New Orleans firms in this industry were forced to close because of the minimum wages established under the act are not borne out by the record.

In 1938, the year in which the act became effective, there were operating in the city of New Orleans some 43 factories producing men's and women's apparel and allied products such as hosiery and neckwear. Additional plants were located in the city of Shreveport. The information on file in the divisions indicates that six of these firms, all located in New Orleans, ceased operating from that time to the present date. We have attempted, so far as is possible, to learn the reasons for the closing of these plants. With respect to four, which I will discuss first, the following seems clear:

Plant A. This plant produced only for local consumption and its manufacturing operations were not subject to the provisions of the act.

Plant B. Bankruptcy was caused by limited capital and high cost of operation due to antiquated machinery.

Plant C. The widow of the owner liquidated the firm following the owner's death.

Plant D. This plant was operated as an adjunct to a wholesaling firm by a partnership conducted by a man and wife. There were no employees. The business was discontinued when the husband resumed his dental practice, which he still maintains.

It is obvious, therefore, that neither the passage nor the administration of the act was a real factor in the decision to close any of these four firms.

Such adverse criticism as has been made appears to revolve entirely around the closing of the two remaining firms, namely Leon Godchaux Clothing, Ltd., and Hirsch & Baer. Both firms were formerly engaged in the manufacture of wash suits in the city of New Orleans.

Information concerning the liquidation of Godchaux's manufacturing department first came to our attention in 1939. Claims that the Fair Labor Standards Act was responsible for this action were repeated from time to time in letters to the Division and in the course of industry committee proceedings. It is significant to note, however, that in an interview with a Division representative in 1941, Mr. Leon Godchaux denied this allegation. Quoting from our inspector, "Mr. Godchaux smiled and assured me that the requirements of the wage and hour law had absolutely nothing to do with his decision to discontinue his manufacturing operations."

Statements that the firm of Hirsch & Baer was forced out of business by the Fair Labor Standards Act are equally without foundation. In this instance, too, the claim has been repeated from time to time in the course of various activities of the Division. Both of the former partners of this firm, Mr. Morris Baer and Mr. Paul Hirsch, have categorically denied in statements to the Division that the Fair Labor Standards Act was the cause of the closing of their firm. In December of 1940 Mr. Baer stated the competitive situation in the industry [seersucker suits] and personal requirements were the primary reasons for the discontinuance of the operation of the firm of Hirsch & Baer. Similarly, the following is quoted from the inspector's notes of a conversation with Mr. Hirsch:

"My partner was 70 years old, had accumulated a nice income through investments upon money realized in the business we conducted and was anxious to retire. Likewise I was also thinking of retirement as I had also acquired a comfortable income from the source of our business. In 1940 Mr. Baer decided to retire; we therefore decided to liquidate the business. My decision not to reorganize or carry on alone was based on the fact that materials were becoming hard to procure in 1940, and I did not feel that I could operate without an experienced partner such as Mr. Baer had been, thus I agreed to the liquidation. You have asked me specifically if the minimum wage had any bearing on our decision to liquidate. In answer I will say that we were paying a 40-cent minimum in 1940, and were anxious to increase it upward somewhat but were unable to do so because of the prices we were receiving for our product. I will emphatically state that the 40-cent minimum and overtime provisions of the Fair Labor Standards Act had no bearing on our liquidation and will further furnish any other information to this effect if you need it."

In further connection with the New Orleans situation, I think you will be interested in knowing that at least three new apparel plants opened in that city in the years following the passage of the act and that all of these plants have continued in operation.

We have found in our experience, almost without exception, that statements attempting to show that the act had an unfavorable effect on certain plants or industries were based on insufficient or inaccurate information. Even where some evidence is presented which might indicate that the act did have some effect there is no certainty that other and more basic reasons were more directly responsible, such as, for example, inefficiency of operations, lack of materials or workers, new conditions brought on by the war, the existence of such low wages previously as to make operations impossible under any decent standard. At any rate, so far as this particular situation is concerned, there is certainly not the slightest doubt that causes other than the Fair Labor Standards Act were controlling.

I am gratified, in a way, that this ghost of the past has again been revived, since it seems to me that the time has finally come to lay it once and for all.

EXHIBIT 2

STATEMENT ON MINIMUM WAGES BY CHESTER BOWLES, ADMINISTRATOR OF THE OFFICE OF PRICE ADMINISTRATION, TO THE SENATE COMMITTEE ON EDUCATION AND LABOR, NOVEMBER 2, 1945.

Your committee has requested my views on the proposed legislation which would raise minimum wages of all workers in interstate commerce to 65 cents an hour. In preparing this statement I have considered your request from three viewpoints.

First, in my capacity as Price Administrator, charged with the responsibility of holding down the cost of living and maintaining a stable level of prices. Second, as a Government official concerned with the future health of our economy and the achievement of high minimum level of security for all of our people.

Third, as a former businessman who is fully familiar with the workings of the profit system, and who believes that our free-enterprise system offers the best hope for a sustained high level of production with prosperity for all of our citizens.

Let me state clearly at the outset that in my opinion the 65 cents minimum wage for all workers in interstate commerce proposed in this bill, is wholly