"Section 13 (a) (2) exempts from the minimum wage and overtime compensation provisions of the act contained in paragraphs 6 and 7, the following: 'Any employee engaged in any retail or service establishment the greater part of whose selling or servicing is in intrastate commerce.'

"The Administrator, basing his argument upon Interpretative Bulletin No. 6 issued December, 1938, and revised June 1941 by the Wage and Hour Division of the United States Department of Labor, contends that the exemptions in paragraph 13 (a) (2) are limited to establishments retail in character whether they sell goods or services. This view is based upon what he conceives to be the implications to be drawn from the legislative history of the act and the grammatical construction of the exemption section. Since the related terms are coupled in the same sentence and are used in the disjunctive with the terms 'retail' and 'service' both modifying the word 'establishment,' they refer to employers who deal directly with private consumers as distinguished from commercial and industrial customers. In other words, the service establishment exemption extends only to those establishments having the characteristic of retail stores, and the defendant's business is not a retail service establishment because 60 percent of its customers are industrial or business concerns.

"We find no support for this interpretation in the language of the exemption section. Two enterprises are therein exempted, one a retail establishment and the other a service establishment, the exemption of each subject to the condition that in the case of the retail establishment the greater part of its selling must be in intrastate commerce, and in the case of a service establishment, the greater part of its servicing must be in intrastate commerce. Had the Congress intended to limit the exemption of service establishments to those which perform services for private individuals as distinguished from business enterprises, it would have had little difficulty in clearly expressing such purpose.

"Linen supply companies and laundries have long been regarded and classified as local service enterprises by Federal departments and agencies, as well as by trade associations and the public. The 1939 census included linen supply services in its classification of service establishments without differentiation in respect to the character of customers. To read into the exemption clause phrasing that would limit it to services performed for private individuals in their homes, would merit the condemnation expressed in the principal case relied upon by the Administrator. Kirschbaum v. Walling (316 U. S. 517). There, on page 522, it is said: 'when the Federal Government takes over such local radiations in the vast network of our national economic enterprise and thereby radically readjusts the balance of State and National authority, those charged with the duty of legislating are reasonably explicit and do not entrust its attainment to that retrospective expansion of meaning which properly deserves the stigma of judicial legislation.'

"The exemption section being without ambiguity, we find no occasion to resort to extrinsic aids to construction, though it may be said in passing that even though we were to consider the legislative history of the section as reviewed by each of the litigants, it would be far from clear that the Congress intended anything other than what it clearly expressed. Nor do we think that the court was premature in dismissing the action without receiving proofs in support of the complaint. The allegations originally were silent as to the interstate extent of the defendant's servicing, and alleged that but 25 percent thereof was rendered to industrial and commercial customers as distinguished from private families or individuals. An amendment several months later charged that 20 percent of the appellee's servicing was to customers in the State of Kentucky and the State of Virginia, and 60 percent to industrial and business concerns. It must be assumed that proofs would not expand the allegations of the amended complaint

and further amendment was not requested even in the face of the motion to dismiss

"The decree is affirmed."

The Supreme Court of the United States denied certiorari.

After this decision, Mr. Walling instructed his field offices to take no further steps to enforce the interpretations, but he did not change the official interpretation itself. Thus, workers in laundries and linen supply companies throughout the United States are still encouraged by the Wage-Hour Division to believe that in some cases laundries are not exempt. This has resulted in numerous other suits in various State courts and Federal courts throughout the country and has caused great expense and embarrassment to many employers. The question is currently being tried in several courts.

Apparently, the only way to resolve this question is for Congress to indicate clearly that it intended to exempt all laundries whether or not they serve hotels, restaurants, etc. The Wage-Hour Division bases its interpretation on the hairsplitting argument that the phrase, "retail or service establishment" which appears in section 13 (a) (2) means "retail or retail service establishment." Accordingly, it is suggested that the clause be amended to avoid this absurd interpretation. In its present form section 13 (a) (2) exempts "any employee engaged in any retail or service establishment. It is suggested that this be amended to read "any employee engaged in any retail establishment or service establishment.

* *

* *

When the act was passed in 1938 Congress was well aware of the fact that "service establishments" required an exemption from the wage-hour law. Senator Aiken of this committee several weeks ago stated publicly that the minimum wage must be revised upward. He cautions, however, that increases must not be so rapid as to disrupt industry and there must be fair safeguards for exemptions. The history of administrative agencies discloses numerous instances of expansion of activities beyond the scope originally contemplated by the legislation which created the agency. This, however, appears to be the first case where an agency publicly recognizes congressional intent and yet distributes its official bulletins inviting employee suits based on an interpretation in direct conflict with the intent of Congress.

We ask this committee to make the change which I have suggested here and bring this intolerable situation to an end.

I appreciate the opportunity which this committee has given me to present the views of the associations which I represent.

EXHIBIT 16

STATEMENT OF JACK GARRETT SCOTT, GENERAL COUNSEL THE NATIONAL ASSOCIATION OF MOTOR BUS OPERATORS BEFORE A SUBCOMMITTEE OF THE SENATE COMMITTEE ON EDUCATION AND LABOR RELATIVE TO S. 1349, TO AMEND THE FAIR LABOR STANDARD'S ACT

"My name is Jack Garrett Scott. I am general counsel of the National Association of Motor Bus Operators which is the only national trade association of the intercity motor bus industry. Including members of affiliated State associations, it represents approximately 650 common carriers of passengers by motor vehicle, all of whom are subject to regulation by Federal or State agencies, or both. The industry is predominantly one of small enterprises. Of the approximately 1,500 motor carriers of passengers subject to the provisions of the Interstate Commerce Act, only 220 had gross revenues of $100,000 or more in 1944, and only 145 in 1940, the last normal year for the bus business. The present number of class I carriers will undoubtedly shrink, now that the war is over, to or below the figure of 1940.

Our industry is opposed to the enactment of S. 1349 as it is now written. Our objections fall mainly into four categories, and my discussion will be so divided. These points have to do with the following: (1) The proposed progressive increase in minimum wage rates to 65, 70, and 75 cents per hour; (2) the proposal to remove the exemption from the provisions of section 7 from those employees of common carriers by motor vehicle subject to the jurisdiction of the Interstate Commerce Commission as to whom that Commission has not prescribed qualifications and maximum hours of service; (3) the proposal to establish job rates above the minimum for the purpose of maintaining wage differentials on the basis of variations in skills and the like; and (4) the establishment of a 5-year period of limitations for the institution of employee actions for unpaid minimum wages or overtime compensation and liquidated damages.

Preliminarily, the following additional facts concerning the industry may be of interest. It employs approximately 70,000 workers who are engaged in the task of providing intercity transportation of passengers by motorbus to and from practically every city, town, hamlet, and other community in America.

Unlike the local transit industry, which is totally exempt from the provisions of the Fair Labor Standards Act, the bus industry is subject to the minimumwage requirements of the Fair Labor Standards Act. Much of the testimony presented to this Committee has dealt with the probable effects of the proposed revisions in that act, as set forth in S. 1349, upon manufacturing industries. Because of the nature of its operations, the intercity bus industry occupies a somewhat unique position-one that differs markedly from the typical manufacturing operation.

One of the principal differences is that we are subject to the strictest and most comprehensive kind of governmental regulation. The price which we may charge for our service is under the exclusive control of the Interstate Commerce Commission and the several State utility or public service commissions. No increases in revenues, therefore, are possible without the approval of those bodies. But more important even than the matter of regulation, is the fact that our fares are subject to an economic price ceiling growing out of competition, above which we could not go if we would even if the regulatory agencies should give their approval.

In 1941, for example, the last normal year before wartime restrictions on gas, tires, and automobile manufacture, approximately 86 percent of all intercity passenger travel was by privately owned and operated passenger cars. The balance was divided up between the railroads and the buses, with a small frac tion of 1 percent going by air. With the elimination of wartime restrictions on private passenger travel, intercity travel by passenger car will undoubtedly jump back to or beyond its prewar levels. In addition to this, the motor bus industry will undoubtedly face greatly intensified competition from railroads and airlines. As a consequence it is impossible for use to raise our fares in order to obtain revenues necessary to meet added costs or for any other reason, if we expect to continue to attract traffic and to remain in business. We are faced with greatly decreased revenues without any doubt. Our present average operating costs per bus mile are greater in most instances than our total revenues per bus mile before the war. Even if there are no increases in labor costs, by reason of this bill or others of similar import or of labor's demands, we will be hard put to it to continue performance of this highly important transportation service and to provide employment for the industry's 70,000 workers.