To summarize, I think the proposed jump from an hourly minimum of 40 cents to 65 cents at once and 70 and 75 cents in the following years, is a reckless jolt to the economic system.

The proposal to fix wages also in the higher brackets is a departure which is rejected by your competent Government Administrator of the present act, by the AFL, and by the NAM-all acting on their practical judgment that it is unworkable.

STATUTE OF LIMITATIONS

A statute of limitations to fix the time within which employee suits under the wage-and-hour law must be brought is vitally needed. There are now pending in the House and Senate bills to amend the Judicial Code and establish a 1-year Federal statute of limitations affecting private rights of action founded upon Federal law.

After extensive hearings before a subcommittee, the House Judiciary Committee reported favorably on the bill before it on October 9, 1945.

Although I have not had an opportunity to study the hearings on H. R. 2788, I have been assured by persons who have that those hearings contain complete information (from government, labor, and industry) regarding the need for a short statute of limitations affecting employee suits under the wage-hour law. If it is not contrary to your practices, I urge you to incorporate the record of hearings on H. R. 2788 in your hearings on S. 1349. In any event, all facts presented at those hearings should be considered before you act to amend the wage-hour law to fix a statute of limitations affecting employee suits.

If it is not possible for you to incorporate in your hearings the record made before the House Judiciary Subcommittee, I would like to have the opportunity of supplying a statement outlining the position of NAM in this matter.

The National Association of Manufacturers believes that Congress should enact a short statute either as a direct amendment to the wage-and-hour law, or as an amendment to the Judicial Code which would result from congressional enactment of H. R. 2788 or S. 1013.

We are firmly convinced that, in all fairness, employers should have some reasonable certainty in determining their contingent liabilities that might be provided by a statute of limitations not exceeding 1 year.

SUGGESTED ACTION

S. 1349 contains no provision clarifying many ambiguous terms of the wagehour law which have resulted in needless litigation and continuing uncertainty. I sincerely recommend that you examine the many undefined terms used in the law which according to the wage-hour administrator have presented "difficulties not only to employers but to the Division itself." The meaning of those terms should be clarified.

Operating under the Fair Labor Standards Act is not simple. By far the greatest majority of employers seek to comply with the law. The meaning of the law, therefore, should be made clear by Congress and not left to an unguided administrative agency.

WALSH-HEALEY REPEAL

Earlier in my testimony, I referred to the differences in the child-labor standards of the Walsh-Healey Act and the wage-and-hour law. I then suggested that there did not appear to be any real justification for those differences and recommended that the Walsh-Healey standard be eliminated.

The other variances between the two laws appear to be equally without justification. I believe the time has come when Congress should examine with care the various provisions in conflict, and to take immediate action to eliminate those conflicts.

I ask you to consider whether the added restrictions imposed upon industry because of the Walsh-Healey Act are necessary in any material respect in the light of the coverage and applicability of the wage-hour law. I feel sure you will not; thus, I submit, the Walsh-Healey Act should be repealed immediately, and I so recommend.

EXHIBIT 14

STATEMENT OF NATIONAL COTTONSEED PRODUCTS ASSOCIATION, RE AMENDMENTS TO FAIR LABOR STANDARDS ACT, S. 1282 AND S. 1349

The National Cottonseed Products Association is a trade association represent ing the cottonseed crushing industry of the United States. It is composed of 371 out of the 394 cottonseed crushing mills in this country. These mills are located in all of the cotton-producing States, from North Carolina to California. They are engaged in the purchase of cottonseed and in the production and sale of cottonseed products: namely, oil, cake or meal, hulls, and linters. During recent years the value of cottonseed products produced by the mills has averaged about $290,000,000. Average annual employment is approximately 16,000 persons. The association also has as members 57 refiners of cottonseed oil, and a number of chemists, brokers, and dealers, all of whom perform important functions in the marketing of cottonseed products.

We wish to express to your committee our opposition to the proposed amendments (S. 1282 and S. 1349) to the Fair Labor Standards Act, which amendments would increase the legal minimum wage to 75 cents an hour (ultimately) and would eliminate the present exemption from overtime penalty rates afforded the agricultural processing industries by section 7 (c) of the act. We wish to state at the outset that the cottonseed crushing industry is not opposed to high wages. On the contrary, we favor the highest wage level that the economy of the industry and the environment in which it operates can sustain.

We oppose the proposed amendments for the following reasons:

1. They conflict directly with the conditions under which the cottonseed crushing industry (and other industries) is required to operate under other legislation enacted by Congress. All cottonseed products are at present under price ceilings set by the Office of Price Administration. In addition, the United States Depart ment of Agriculture, through Commodity Credit Corporation, has established a minimum price that mills must pay for their raw material: cottonseed. In other words, the industry is operating on a gross spread, the upper and lower limits of which are already fixed by the Federal Government. This spread is not sufficient to absorb anything like the increase in costs that would result from these amendments. Enactment of this legislation would result in bankruptcy for many mills or would require substantial modification of the existing support price and price ceiling structure. We assume that your committee does not desire to increase the cost of food to the consumer or to reduce the income of the farmer 2. Our second reason for opposing the proposed amendments is that they would eliminate section 7 (c) of the act which at present exempts most of the agricul tural processing industries from penalty payments for work in excess of 40 hours per week. This proposal fails completely to recognize some of the fundamental features of agriculture and of the agricultural processing industries. Farm commodities are neither produced nor marketed on a 40-hour week. The farmer's schedule of production and marketing is determined by the weather. When crops are mature, they must be harvested and marketed with the greatest possible speed. Delay means serious losses from weather damage. The farmer does not pick cotton or combine grain on a 40-hour basis. He usually works from sunup to sundown and frequently into the night. The processing industries must operate on a comparable schedule or commodities will back up on the farm with consequent losses.

On cotton, 80 to 85 percent of the crop is ginned between September 1 and December 1. About 70 percent of the cottonseed crop moves to the crushing mills during the same 3 months. This means roughly 3,000,000 tons or 187,000,000 bushels. In order to keep this tremendous volume moving, most mills must operate 24 hours a day and 6 or 7 days a week.

Theoretically, it is a simple matter to operate such plants within the framework of the proposed amendments by the employment of three or four shifts per week. In practice, this is not possible. Sixty percent of the cottonseed crushing mills are located in communities of less than 10,000 population. In these towns there does not exist any such floating labor supply as would be required to operate these plants on a 40-hour week. From a social standpoint, it would be highly undesirable to attempt to create such a supply to serve a highly seasonal industry, since off-season employment is not available in sufficient volume in these small communities. If, on the other hand, the cottonseed crushing mills were forced to pay time and one-half the regular rate for all hours worked in excess of 40 per week, it would involve an increase of about 25 percent in labor costs, even if no changes were made in the basic minimum rate. , If the proposed increase in the minimum wage to 75 cents an hour were also made effective, the net result would be an increase of approximately 70 percent in the labor cost of crushing cottonseed.

3. Our third objection to the proposed amendments is that they would reduce farm income in order to increase the income of wage earners. Any sudden and arbitrary increase in processing costs, such as is involved in this legislation, can be met from only three sources: (1) Out of the earnings of the industry, (2) in the form of higher prices of products, and (3) in the form of lower prices for raw materials. In the case of cottonseed crushing, the increase involved in these amendments would exceed the earnings of the industry in even its most prosperous years. The major proportion of the increase, if not all of it, would therefore have to come from the consumer in the form of higher prices fr cottonseed products or from the cotton producer in the form of lower prices for cottonseed.

So long as price ceilings are effective, it is obvious that increased processing costs cannot be paid for by higher product prices. Because of the nature of the cottonseed industry, it is doubtful that this could be done even after price ceilings are removed. Cottonseed products are standardized commodities. The supply and price of those products are not subject to control by the processor, as are the supply and price of differentiated commodities, particularly consumers' durable goods. The manufacturer of a motor car or a refrigerator, for example, may, within limits, increase or decrease the supply of his product. He may introduce new models and add or remove accessories. As a result, he can within limits adjust the price of his products in line with changes in costs. The cottonseed crushing mill enjoys no such flexibility. Its products must be sold in the most competitive of markets and prices are determined to a considerable degree by the world price level of competing commodities. Consequently, the bulk of the cost increase involved in these amendments would be reflected in lower prices for cottonseed. The American farmer is already at a disadvantage, relative to industrial labor, in terms of income. We oppose legislation that would take away a part of his income for the benefit of industrial labor.

4. We oppose this legislation further on the ground that it would tend to eliminate the small, country mill. As stated previously, 60 percent of the cottonseed crushing mills are located in communities of less than 10,000 population and these communities do not have a sufficient supply of floating labor for the mills to operate on four shifts per week. Such mills could not pay the penalty rate for overtime and compete with mills located in the larger cities where labor is normally sufficient to permit the employment of several crews per week. The proposed amendments attempt to impose uniform standards on wholly different situations. If enacted, we are convinced that they would force many of the small country mills out of business, with serious losses to the communities in which these mills are located.

5. The amendments provide that an employer shall be liable for so-called unpaid wages and damages for a period of 5 years from the time such wages were due. If the employer's obligations were clearly and understandably written into the law, there would be little objection to this type of provision. However, under the present act and the proposed amendments, the meaning of much of the law is left to the definition and interpretation of the Administrator. During the past several years, we have had considerable experience with such interpretations and we find that the Administrator changes his mind. Our members have acted in good faith on certain administrative interpretations only to have those interpretations changed and to find that they had been “violating" the law for several years according to the new interpretations. This situation can easily bankrupt the small firm and the higher the minimum wage, the greater is the danger.

Based upon the above objections, we make the following recommendations: 1. That the overtime exemption presently afforded the agricultural processing industries by section 7 (c) of the act be retained.

2. That the present minimum wage rate provided in section 6 of the act be unchanged. We are convinced that industrial wage rates will advance steadily during the next few years as a result of increasing productivity and volume production. We are equally convinced that the establishment of the minimum rates proposed in these amendments will result in a reduction of employment and in the elimination of many small firms.

3. That the period during which the employer shall be liable to suit for claimed failure to pay wages called for in the act shall not exceed 2 years.

EXHIBIT 15

STATEMENT OF STANLEY I. POSNER, GENERAL COUNSEL, LINEN SUPPLY ASSOCIATION OF AMERICA, NATIONAL INDUSTRIAL LAUNDERERS AND CLEANERS ASSOCIATION, AND NATIONAL INSTITUTE OF DIAPER SERVICES

Mr. Chairman, my name is Stanley I. Posner. I am general counsel for and appear on behalf of the Linen Supply Association of America, National Industrial Launderers Association, and the National Institute of Diaper Services. These three national trade associations are engaged in the business of supplying and laundering clean work clothes, restaurant, hotel, and barber shop linens, and diapers to hospitals and individual families. branches of the power laundry industry. these three associations are members of the American Institute of Laundering. A large number of the members of That organization encompasses all phases of the laundry industry--hand laundries, power laundries, including linen supply, industrial laundries, and diaper services.

These activities are all recognized

My statement is presented in connection with S. 1349 which proposes increased minimum wage and other amendments to the Fair Labor Standards Act of 1938. Section 7 of this bill proposes an amendment to section 13 of the act. Our members request that this committee clarify a portion of section 13 which will guarantee execution of the congressional intent despite present efforts to defeat a necessary exemption created in the original act.

The Fair Labor Standards Act of 1938 contains an exemption in section 13 (a) (2) for "retail or service establishments the greater part of whose selling or servicing is in intrastate commerce". This exemption was consistent with

the intention of Congress to leave local business to the regulation of the States. The report of the Senate Committee on Education and Labor stated:

"The bill carefully excludes from its scope business in the several States that is of a purely local nature. * * It leaves to State and local communities their own responsibilities concerning those local service and other business trades that do not substantially influence the stream of interstate commerce. For example, the policy in this regard is such that it is not even intended to include in its scope those purely local and small business establishments that happen to be near State lines and solely on account of such locations, actually serve a wholly local community within two States" (p. 5, S. Rept. No. 884).

When the bill was debated in the House, Congresswoman Norton was asked by Congressman Dempsey, "May I ask whether by the wildest stretch of imagination, or regardless of any possible administrative interpretations, this bill can in any way affect such business as that of the local groceryman, druggist, clothing store, meat dealer-any merchant, in fact-laundry, hospital, hotel, or even transportation companies operating solely within a State?" Mrs. Norton replied: "Absolutely not" (Cong. Rec. vol. 83, p. 7299, 75th Cong., 3d sess.).

All branches of the laundry industry have been recognized as "service establishments." I submit an excerpt from the 1939 Census of Service Establishments, classifying the laundry industry and including wholesale plants. Accordingly, laundry operators throughout the country were satisfied that they would continue to be regulated by various State minimum wage-hour laws adapted to conditions prevailing in local areas. Service establishments have always been recognized as a special category in labor legislation because of the high ratio of labor cost to total operating costs. (1939 Census of Service Establishments showed that more than 5 percent of total receipts were paid out as wages. This contrasts with the situation in manufacturing industries, where in 1939 less than 16 percent of total receipts were paid out to labor.)

For more than a year the Wage-Hour Division recognized the congressional intent to exempt all laundries. In 1940, however, the Wage-Hour Division announced that service establishments were exempt only if they were "retail service establishments." Thereupon, the Wage-Hour Division began enforcement proceedings against laundries and linen supply companies which rendered services to hotels, barber shops, restaurants, or other types of commercial customers. This interpretation (incorporated in Wage-Hour Interpretative Bulletin No. 6) encouraged a number of workers to bring suits against laundries. With only one exception the courts have agreed that the statutory exemption for service establishments includes all laundries whether or not they do work for hotels, restaurants, or other commercial customers.

The Administrator of the Wage-Hour Division has admitted that the interpretation in Bulletin No. 6 is contrary to the intention of Congress. About the middle of 1942 there was an exchange of correspondence between Metcalfe Walling, Administrator for the Wage-Hour Division, and Congressman Hartley of New Jersey, who was a member of the House Labor Committee and conference committee which handled the original Fair Labor Standards Act. Mr. Walling unequivocally stated in a letter dated July 2, and again on February 22, 1943, that he was "very much inclined to the view that all laundries regardless of whether they do so-called commercial work or not were intended by the Congress to be exempt." Mr. Walling explained that the ruling incorporated in Interpretative Bulletin No. 6 had been issued by his predecessor, General Fleming, and that he felt he could make no change until the conclusion of a court case (Lonas v. National Linen Service) which was then pending on the very question.

Shortly thereafter the United States Court of Appeals for the Sixth Circuit unanimously held that all laundries, regardless of whether they do commercial work or not, are service establishments and exempt. The court by unanimous decision on June 22, 1943, held as follows: