bling industries. No. 62. Fruit and vegetable packing and farm July 2, 1943 products assem- July 15, 1943 July 27, 1943 July 30, 1943 40.0 150,000 10,000 Aug. 26, 1943. (Dec. 2, 1943. Apr. 20, 1944 Dec. 29, 1943 May 22, 1944 Feb. 7, 1944 No. 63. Wholesaling, ware July 20, 1943 Aug. 17, 1943 Aug. 18, 1943 40.0 900,000 55,000 Sept. 16, 1943. housing, and other 1 For nonseasonal industries, the number of covered workers is an estimate of the number covered during the month preceding the date of the industry committee meeting; for seasonal industries, covered employment for a peak season preceding the date of the meeting is shown. 2 Major. 3 Minor. 4 Recommendations of Industry Committee No. 2 for 32 cents for embroideries and 40 cents for hand embroideries rejected by the Administrator. Recommendations of Industry Committee No. 17 for 35 and 40 cents rejected by the Administrator. • Reargument. 7 Memphis. Washington, D. C. TESTIMONY OF L. METCALFE WALLING, ADMINISTRATOR OF THE FAIR LABOR STANDARDS ACT AND PUBLIC CONTRACTS ACT, ON H. R. 2788, JUNE 27, 1945 I appreciate the opportunity to appear before the Judiciary Committee to comment on the Gwynne bill, since it raises a very fundamental question in the administration of the Fair Labor Standards Act. I recognize that the bill covers a much wider field than the Fair Labor Standards Act or the Public Contracts Act, but I feel sure that no statutory rights would be more directly affected than those arising under the Fair Labor Standards Act. Since this bill goes to the heart of some of the most important recommendations which I made in my last annual report to the Congress, I should like to discuss the bill in its larger framework. I pointed out in my report some serious difficulties which were hampering effective administration of the Fair Labor Standards Act, and I urged the Congress to give serious consideration to what I consider are necessary legislative solutions. I am delighted that an approach has been made in this bill to the solution of at least one of these important problems. Among the matters to which I called attention were these: (1) Authority for the Administrator to bring action directly in the recovery of wages due under the act; (2) authority for the Administrator to promulgate regulations defining and interpreting the act so as to protect an employer from criminal or civil liability when he follows the administrator's interpretations; (3) a reasonable statute of limitations for recovery of wages owed under the act. If the Congress would give consideration to dealing with the other two problems which I have just mentioned,an important step would be taken to improve serious defects in the law and to promote a more fair and equalized treatment of both employer and employee under it. This is an important matter to both labor and management, since about 21,000,000 workers are estimated to be subject to its provisions. At the present time the only way an employee can secure the wages which are due him under the act is either to rely on the Administrator's enforcement efforts through inspection of his employers' establishments, which result in the payment of wages to the employees voluntarily by their employers,or to bring a civil action under section 16 (b) of the statute to recover directly the wages due them, in which case they are entitled to an additional amount as liquidated damages. Despie what would seem the obvious temptation to use the 16 (b) procedure, since it results in twice as much money paid to the employee, the average employee is reluctant to sue and utilize court mechanism. The best information now available to the Divisions show a total of less than 5,000 employee suits since the inception of the act in October 1938. Admittedly, the record is incomplete, since many cases may not have been reported and others may have been settled out of court. Even if the true total were double that of which we have a record, it would still be very small compared with the more than 100,000 establishments found to be in monetary violation by our inspectors. Our experience shows that the overwhelming majority of employees who have been paid less than the act requires relied on the Divisions for their remedy. In contrast to the few thousand who sought redress in the courts are some 90,000 who lodged complaints with the Divisions. Inspection of the establishments involved in these complaints has resulted in the restoration of nearly $50,000,000 in back wages due under the act. Even more significant is the fact that employees very commonly wait for the Division to secure their rights, taking no action at all. They may be uncertain of their rights, they may be hesitant about asserting them, or they may actually be afraid to do so. In any case, the inspection of 41,000 establishments, in the fiscal year 1944, against which no complaint had been filed resulted in the payment of nearly $9,000,000 in back wages to 293,000 employees. This outcome of the Divisions' spot-check program of noncomplaint inspection repeated the experience of previous years. In the first 7 months of the current fiscal year 132,000 employees who had taken no action on their own behalf received over four and one-half million dollars in back pay as a result of noncomplaint inspections. Of the more than 20,000,000 employees covered by the act there are approximately 9,000,000 who do not belong to any labor union. Many of these work in low-wage areas and industries that have not fared well in the current boom. Many do not even now receive wages meeting the standards provided by Congress in 1938 when the act was passed. The Divisions seek to secure for all employees subject to the act the benefits to which they are entitled under its provisions. The performance of this task has been hampered by lack of authority for the Administrator to bring action directly in the recovery of money due employees under the act. The obligation on the Administrator to assure equally the rights, under the act, of all covered employees is almost too obvious to need mention. From the standpoint of administration, it is no less important that the provisions of the act be applied equally to all employers subject to its requirements. Such an employer should be able to secure readily an authoritative interpretation of how the provisions of the act apply to his operating conditions and to his employees. He should be secure in the knowledge that another employer in similar circumstances will be subject to similar obligations under the act. The present provisions of the act have not always permitted these desired conditions. The Administrator does not have adequate authority to define the terms and provisions of the act, and employers who comply with his regulations in good faith do not have protection against employee suits. Employers in some instances have secured competitive advantages over other employers who voluntarily paid back wages or who incurred added costs by complying with the act and the interpretations of the Administrator. Employers who paid back wages on request of the Administrator's enforcement agents were uncertain of their status with regard to employee suits for an equal amount in liquidated damages. Employers who complied with opinions announced by the Administrator might find themselves subject to several years of accrued wage liability plus liquidated damages when a court decision reversed an interpretation of the Administrator or held adversely to the employer in a situation on which the Administrator had taken no position. A striking instance of this is the recent situation brought about by the Supreme Court's decision invalidating the Administrator's definition of the area of production exemption in the statute. Despite the fact that the great bulk of employers followed in good faith the Administrator's definition, under the Supreme Court decision they are not protected by law but as much subject to back-wage claims by their employees as though they had willfully defied the Administrator and refused to comply with his definition. To my mind, this is most unfair and inequitable. The cure is to permit the Administrator to protect those employers who follow his interpretation of the statute in good faith. Under the present circumstances, with the Administrator having no power of interpretation but only of giving advisory opinions, the courts having sole power, the Administrator has no way of separating the sheep from the goats, if I may term it thus, and the innocent violator is punished equally with the guilty if he is sued by his employees in court. Similarly, an employer might be subject to retroactive liability in instances in which the Administrator found it necessary to reverse a previous interpretation on review or in the light of new facts. While the Administrator's enforcement agents in the latter situation would apply the new position prospectively, the employer has no similar protection against 16 (b) suits retroactively. Authority of the Administrator to define terms in the act and protection from retroactive liability for the employer who complies with the Administrator's definition are permanent needs in the provisions of the act. The solution of interpretative problems is a continuing function in the enforcement of legislation such as the Fair Labor Standards Act. The economic system of this country is enormously complex. Integration of operations develops in diverse ways and in varying degree. Channels of distribution change. While major patterns of operation may be relatively stable from one year to the next, the borders between extractive industry and fabrication, between manufacturing and distributing, between wholesaling and retailing, are hard to define and subject to change. The changes may and often do result in changes in the applicability of the provisions of the act. Definition and interpretation are, therefore, not merely functions of the divisions in the first year of enforcement of the act but in every year. Some major problems may be solved and the solutions hold good for many years; other major problems and many minor ones may require early review or new interpretations. The way in which these problems can be handled under the act is a serious concern to those subject to it. The act should contain provisions under which maximum advantage to employees under its terms may be insured and competitive inequities among employers tracing from the enforcement of the act minimized. At the present time the Administrator can only give advisory opinions which are, at best, his informed guess and prediction of what the courts will decide. |