Overnight Motor Transportation Company v. Missel/Opinion of the Court

This case involves the application of the overtime section of the Fair Labor Standards Act of 1938 to an employee working irregular hours for a fixed weekly wage.

Respondent, Missel, was an employee of the petitioner, Overnight Motor Transportation Company, a corporation engaged in interstate motor transportation as a common carrier. He acted as rate clerk and performed other incidental duties, none of which were connected with safety of operation. The work for which he was employed involved wide fluctuations in the time required to complete his duties. The employment of respondent began before the effective date of the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., October 24, 1938, and terminated October 19, 1940. Until November 1, 1938, his salary was $25.50 per week and thereafter $27.50. Time records are available for only a third of the critical period, and these show an average workweek of 65 hours, with a maximum of 80 for each of two weeks in the first year of the Act's operation and a maximum of 75 hours in each of three weeks in the second year. Nothing above the weekly wage was paid, because these maximum workweeks, computed at the statutory minimum rates with time and a half for overtime for the years in question, would not require an addition to the weekly wage.

Respondent brought a statutory action to recover alleged unpaid overtime compensation in such sum as might be found due him, an additional equal amount as liquidated damages, and counsel fee. The trial court, refusing to hear evidence on the precise amount claimed, decided in favor of the petitioner on the ground that an agreement for a fixed weekly wage for irregular hours satisfied the requirements of the Act. Under such circumstances the court was of the view that pay would be adequate which amounted to the required minimum for the regular hours and time and a half the minimum for overtime. 40 F.Supp. 174. The Circuit Court of Appeals reversed with directions to enter judgment for the plaintiff in accordance with its opinion, an order which we interpret as authorizing a hearing in the trial court as to the amounts due. 126 F.2d 98. As the questions involved were important in the administration of the Fair Labor Standards Act, we granted certiorari. 315 U.S. 791, 62 S.Ct. 641, 86 L.Ed. --.

Petitioner renews here its contentions that the private right to contract for a fixed weekly wage with employees in commerce is restricted only by the requirement that the wages paid should comply with the minimum wage schedule of the Fair Labor Standards Act, section 6, 29 U.S.C.A. § 206, with overtime pay at time and a half that minimum, that in any event the Act does not preclude lump sum salaries in excess of the minimum, and that a contrary interpretation of the statute would render it unconstitutional.

It is plain that the respondent as a transportation worker was engaged in commerce within the meaning of the Act, and unless specifically exempted was entitled to whatever benefits the overtime provisions conferred.

While now conceding that United States v. Darby, 312 U.S. 100, 657, 61 S.Ct. 451, 85 L.Ed. 609, 132 A.L.R. 1430, settles the constitutional power of Congress to legislate against labor conditions detrimental to a minimum standard of living required for the general well-being of workers, petitioner argues that there is no power under the Constitution to regulate the hours or wages of workers whose pay, in every instance, at least equals the minimum and whose hours are not injurious to health. Freedom of contract between employer and employee, it is urged, is destroyed by such an interpretation. But hours or wages not patently burdensome to health may yet be subject to regulation to achieve other purposes. We assume here the statutory objectives discussed later, i.e., that the act is aimed at hours as well as wages. The commerce power is plenary, may deal with activities in connection with production for commerce and as said in the Darby case, may extend 'to those activities intrastate which so affect interstate commerce or the exercise of the power of Congress over it as to make regulation of them appropriate means to the attainment of a legitimate end, the exercise of the granted power of Congress to regulate interstate commerce.' 312 U.S. at page 118, 61 S.Ct. at page 459, 85 L.Ed. 609, 132 A.L.R. 1430. Long hours may impede the free interstate flow of commodities by creating friction between production areas with different length workweeks, by offering opportunities for unfair competition through undue extension of hours, and by inducing labor discontent apt to lead to interference with commerce through interruption of work. Overtime pay probably will not solve all problems of overtime work, but Congress may properly use it to lessen the irritations. Substandard labor conditions were deemed by Congress to be 'injurious to the commerce and to the states from and to which the commerce flows.' United States v. Darby, 312 U.S. 100, 115, 657, 61 S.Ct. 451, 457, 85 L.Ed. 609, 132 A.L.R. 1430. To protect that commerce from the consequences of production of goods under substandard conditions, it may choose means reasonably adapted to those ends, including regulation of intrastate activities, 312 U.S. at page 121, 61 S.Ct. at page 460, 85 L.Ed. 609, 132 A.L.R. 1430, by minimum wage and maximum hour requirements, 312 U.S. at page 123, 61 S.Ct. at page 461, 85 L.Ed. 609, 132 A.L.R. 1430. Compare Santa Cruz Fruit Packing Co. v. National Labor Relations Board, 303 U.S. 453, 466, 58 S.Ct. 656, 660, 82 L.Ed. 954. If overtime pay may have this effect upon commerce, private contracts made before or after the passage of legislation regulating overtime cannot take the overtime transactions 'from the reach of dominant constitutional power.' Norman v. Baltimore & O.R. Co., 294 U.S. 240, 306-311, 55 S.Ct. 407, 416, 79 L.Ed. 885, 95 A.L.R. 1352. If in the judgment of Congress time and a half for overtime has a substantial effect on these conditions it lies with Congress' power to use it to promote the employees' well-being.

Statutory Construction. The petitioner attacks the basic conceptions upon which the Circuit Court of Appeals determined that the compensation paid by the respondent violated section 7(a) of the act. That court felt that 'one of the fundamental purposes of the Act was to induce worksharing and relieve unemployment by reducing hours of work.' (126 F.2d 98, 103.) We agree that the purpose of the act was not limited to a scheme to raise substandard wages first by a minimum wage and then by increased pay for overtime work. Of course, this was one effect of the time and a half provision, but another and an intended effect was to require extra pay for overtime work by those covered by the act even though their hourly wages exceeded the statutory minimum. The provision of section 7(a) requiring this extra pay for overtime is clear and unambiguous. It calls for 150% of the regular, not the minimum, wage. By this requirement, although overtime was not flatly prohibited, financial pressure was applied to spread employment to avoid the extra wage and workers were assured additional pay to compensate them for the burden of a workweek beyond the hours fixed in the act. In a period of widespread unemployment and small profits, the economy inherent in avoiding extra pay was expected to have an appreciable effect in the distribution of available work. Reduction of hours was a part of the plan from the beginning. 'A fair day's pay for a fair day's work' was the objective stated in the Presidential message which initiated the legislation. That message referred to a 'general maximum working week', 'longer hours on the payment of time and a half for overtime' and the evil of 'overwork' as well as 'underpay.' The message of November 15, 1937, calling for the enactment of this type of legislation referred again to protection from excessive hours. Senate Report No. 884 just cited, page 4, the companion House Report and the Conference report all spoke of maximum hours as a separately desirable object. Indeed, the form of the act itself in setting up two sections of standards, Section 6 for wages and Section 7 for hours, emphasizes the duality of the Congressional purpose. The existence of such a purpose is no less certain because Congress chose to use a less drastic form of limitation than outright prohibition of overtime. We conclude that the act was designed to require payment for overtime at time and a half the regular pay, where that pay is above the minimum, as well as where the regular pay is at the minimum.

We now come to the determination of the meaning of the words 'the regular rate at which he is employed.' Since we have previously determined in this opinion, in the discussion of petitioner's objection to the application of the Act on the ground of unconstitutionality, that the scope of the commerce power is broad enough to support federal regulation of hours, we are concerned at this point only with the method of finding the regular rate under the contract with respondent. Congress might have sought its objective of clearing the channel of commerce of the obstacles of burdensome labor disputes by minimum wage legislation only. We have seen that it added overtime pay. The wages for minimum pay are expressed in terms of so much an hour. Sec. 6(a)(1)-'Not less than 25 cents an hour' with raises for succeeding years or by order of the Administrator under Sec. 8. Cf. Opp Cotton Mills v. Administrator, 312 U.S. 126, 657, 61 S.Ct. 524, 85 L.Ed. 624. Neither the wage, the hour nor the overtime provisions of sections 6 and 7 on their passage spoke specifically of any other method of paying wages except by hourly rate. But we have no doubt that pay by the week, to be reduced by some method of computation to hourly rates, was also covered by the act. It is likewise abundantly clear from the words of section 7 that the unit of time under that section within which to distinguish regular from overtime is the week. 'No employer shall * *  * employ any of his employees *  *  * (1) for a workweek longer that forty-four hours *  *  * .' Sec. 7(a)(1).

No problem is presented in assimilating the computation of overtime for employees under contract for a fixed weekly wage for regular contract hours which are the actual hours worked, to similar computations for employees on hourly rates. Where the employment contract is for a weekly wage with variable or fluctuating hours the same method of computation produces the regular rate for each week. As that rate is on an hourly basis, it is regular in the statutory sense inasmuch as the rate per hour does not vary for the entire week, though week by week the regular rate varies with the number of hours worked. It is true that the longer the hours the less the rate and the pay per hour. This is not an argument, however, against this method of determining the regular rate of employment for the week in question. Apart from the Act if there is a fixed weekly wage regardless of the length of the workweek, the longer the hours the less are the earnings per hour. This method of computation has been approved by each circuit court of appeals which has considered such problems. See Warren-Bradshaw Drilling Co. v. Hall, 5 Cir., 124 F.2d 42, 44; Bumpus v. Continental Baking Co., 6 Cir., 124 F.2d 549, 552, cf. Carleton Screw Products Co. v. Fleming, 8 Cir., 126 F.2d 537, 541. It is this quotient which is the 'regular rate at which an employee is employed' under contracts of the types described and applied in this paragraph for fixed weekly compensation for hours, certain or variable.

Petitioner invokes the presumption that contracting parties contemplate compliance with law and contends that accordingly there is no warrant for construing the contract as paying the employee only his base pay or 'regular rate,' regardless of hours worked. It is true that the wage paid was sufficiently large to cover both base pay and fifty per cent additional for the hours actually worked over the statutory maximum without violating section six. But there was no contractual limit upon the hours which petitioner could have required respondent to work for the agreed wage, had he seen fit to do so, and no provision for additional pay in the event the hours worked required minimum compensation greater than the fixed wage. Implication cannot mend a contract so deficient in complying with the law. This contract differs from the one in Walling v. A. H. Belo Corp., 316 U.S. 624, 62 S.Ct. 1223, 86 L.Ed. --, decided today, where the contract specified an hourly rate and not less than time and a half for overtime, with a guaranty of a fixed weekly sum, and required the employer to pay more than the weekly guaranty where the hours worked at the contract rate exceeded that sum.

In the Circuit Court of Appeals it was held that the liquidated damages provision, section 16(b) of the Act, 52 Stat. 1069, was mandatory on the courts, regardless of the good faith of the employer or the reasonableness of his attitude. Petitioner attacks this conclusion as a denial of due process because if the damage provision is mandatory, the employer is 'without opportunity to test the issues before the courts,' citing Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714, 13 L.R.A.,N.S., 932, 14 Ann.Cas. 764, Wadley Southern R. Co. v. Georgia, 235 U.S. 651, 35 S.Ct. 214, 59 L.Ed. 405, and other similar cases. Petitioner points out that if there was a failure to pay the statutory overtime, it resulted from an inability to determine whether the employee was covered by the Act.

Section 13(b)(1) exempts from section 7 employees for whom the Interstate Commerce Commission has power to establish maximum hours of service. This exemption was derived from the Motor Carrier Act of 1935, 49 Stat. 543, 49 U.S.C.A. § 304, which authorized the Commission to regulate 'maximum hours of service of employees.' A definitive order leaving employees with the duties of respondent subject to the Fair Labor Standards Act was not passed by the Commission until March 4, 1941, after respondent's employment ended. This conclusion, however, was foreshadowed by the ruling of the Commission, December 29, 1937 that it would limit regulations concerning maximum hours to employees whose functions affected the safety of operations. Other orders, bulletins and opinions pointing to the final conclusion intervened. These various determinations now make it clear that respondent was subject at all times since the effective date of the Fair Labor Standards Act to its provisions. The Interstate Commerce Commission never had the power to regulate his hours.

Perplexing as petitioner's problem may have been, the difficulty does not warrant shifting the burden to the employee. The wages were specified for him by the statute, and he was no more at fault than the employer. The liquidated damages for failure to pay the minimum wages under sections 6(a) and 7(a) are compensation, not a penalty or punishment by the Government. Cf. Huntington v. Attrill, 146 U.S. 657, 667, 668, 674, 681, 13 S.Ct. 224, 227, 228, 230, 233, 36 L.Ed. 1123; Cox v. Lykes Brothers, 237 N.Y. 376, 143 N.E. 226. The retention of a workman's pay may well result in damages too obscure and difficult of proof for estimate other than by liquidated damages. Atchison, etc., R. Co. v. Nichols, 264 U.S. 348, 351, 44 S.Ct. 353, 354, 68 L.Ed. 720; James-Dickinson Farm Mortg. Co. v. Harry, 273 U.S. 119, 47 S.Ct. 308, 71 L.Ed. 569. Nor can it be said that the exaction is violative of due process. It is not a threat of criminal proceedings or prohibitive fines, such as have been held beyond legislative power by the authorities cited by petitioner. Even double damages treated as penalties have been upheld as within constitutional power.

Affirmed.

The CHIEF JUSTICE concurs in the result.

Mr. Justice ROBERTS dissents.