Walling v. United States (331 U.S. 17)/Opinion of the Court

This case brings here a question as to the application of the overtime provisions of the Fair Labor Standards Act to the payment of compensation pursuant to employment contracts similar to those in Walling v. A. H. Belo Corp., 316 U.S. 624, 62 S.Ct. 1223, 86 L.Ed. 1716.

Respondent is engaged in the business of cementing, testing and otherwise servicing oil wells, for which it uses its own peculiar equipment. To operate this equipment respondent retains a highly stabilized group of skilled and specially trained 'field employees.' The volume of respondent's business, however, is highly inconstant. Consequently, these employees are required to work a variable number of hours from day to day and from week to week.

Prior to passage of the Act in 1938, these employees were paid fixed monthly salaries. Thereafter, they were put on a 'weekly-guarantee' plan similar to that which was to be involved in the Belo case. This plan was abandoned March 1, 1942, under pressure from the Administrator of the Act, and reinstated July 1, 1942, after the Bel decision had seemed to end all questions as to its legality. Since its reinstatement the plan has been continuously in effect, and embodied in formal written contracts between respondent and the employees to whom it has applied.

The part of these contracts now in issue is respondent's agreement to pay these employees 'a regular basic rate of (a specified number of) cents per hour for the first 40 hours of any workweek, and not less than one and one-half times such basic hourly rate of pay for all time over 40 hours in any workweek, with a guarantee that Employee shall receive for regular time and for such overtime as the necessities of the business may demand a sum not less than $ (a specified number) for each workweek.'

The regular basic rate so specified was in each case at or above the minimum prescribed by the Act or by the Administrator's order, but that rate was always so related to the guaranteed flat sum that the employee became entitled to more than the guarantee only in weeks in which he worked more than 84 hours. The compensation actually paid was regularly consistent with the contractual obligation as stated.

Petitioner sued respondent under § 17 of the Act to enjoin against future adherence to this plan, on the ground that it failed to include overtime compensation as required by § 7(a). He contended that the actual 'regular rate' of compensation payable under these contracts was not the specified basic rate, but rather the quotient of the amount of the correlative guarantee divided by the number of hours worked in that week. This was said to follow from the fact that the employees usually worked less than 84 hours a week and nevertheless received the full guaranteed sum.

The District Court (316 U.S. 627-629, 62 S.Ct. 1226) found, however, that the contracts were 'bona fide,' and that 'they were intended to, and did, really fix the regular rates' at which the men were employed. It denied relief and the Circuit Court of Appeals affirmed, both Courts relying on our decision in the Belo case.

Petitioner admits a close similarity of facts and of his basic contentions in this and the Belo case. He argues, however, that the Belo decision should not be followed: (a) because there are factual differences between the two cases adequate to distinguish them, (b) because Belo has been implicitly overruled by later decisions of this Court, and (c) because the Belo decision is erroneous.

As to the first of these arguments, we note that the contracts in Belo and in this case are substantially identical, except for the amount of the hourly rate and of the fixed guarantee. Under the Belo contract, however, overtime would be paid in addition to the guaranteed wage after 54 1/2 hours had been worked in any given week; under this contract, only after 84 hours. It is said that this 84 hours bears no relation to the usual workweek.

Actually, the employees in this case have no usual workweek. In many weeks they work more than 100 hours; in others less than 30. In about 20 per cent of the workweeks, they work in excess of 84 hours. Whenever they do, they are paid in accordance with the contract on the basis of the specified hourly rate with appropriate overtime.

No more can be said as to the relation between 54 1/2 hours and the usual workweek in Belo. It appears from the record in that case that the employees there involved also worked fluctuating workweeks, and that the average workweek was substantially less than 54 1/2 hours. Indeed, it appears that the Belo employees exceeded 54 1/2 hours in considerably less than 20 per cent of the weeks worked. When they did so, they too were paid at the contractual rate with appropriate overtime. There is nothing here to suggest different treatment of the two cases.

Petitioner also points to alleged differences in the fact that respondent in this case paid the full weekly guarantee given when its employees worked less than 40 hours in the week, and the fact that respondent carried fixed rather than fluctuating overtime rates on its payroll records.

As to the first of these points, there is actually no difference between this case and Belo. The employees in both cases had a contractual right to the full guarantee however short their workweek, and those in Belo were paid it as well as those here. The second fact we think without significance. The function of the payroll records was merely to show the amounts of compensation payable. These records did not affect respondent's contract obligations, nor suggest a practice at variance with the contract.

We think that whatever differences exist between this case and Belo are without substance, and that it must either be followed or overruled.

This brings us to petitioner's second argument, in which our attention is directed to three cases decided since Belo, wherein we held that certain plans of overtime compensation failed to meet the § 7(a) requirement. It is urged that the provisions for overtime compensation in these cases were legally no less adequate than, and that the principles on which they were decided are necessarily inconsistent with, the overtime provision and the principles of the Belo case.

In Belo itself, the specified basic hourly rate was held to be the actual regular rate because, as to weeks in which employees worked more than 54 1/2 hours, the specified rate determined the amount of compensation actually payable; as to weeks in which they worked less, the Court inferred from the collateral specification of a basic rate and provision for a legal but variable rate of overtime pay that the guaranteed flat sum then due also contemplated both basic pay and overtime. On the other hand, we find that in the three later cases relied on by petitioner, the agreed method by which wages were computed made a like inference impossible.

In Walling v. Halmerich & Payne, Inc., 323 U.S. 37, 65 S.Ct. 11, 89 L.Ed. 29, we considered a 'split-day plan,' under which a prescribed 'regular' hourly rate was payable for the first four hours of each eight-hour shift, and a prescribed 'overtime' rate, of one and one-half the 'regular' rate, was payable for the other four hours. In those weeks in which an employee worked statutory overtime, he was paid at the contract 'overtime' rate for many straight-time hours and at the contract 'regular' rate for many overtime hours. Obviously, these prescribed rates were not actual regular and overtime rates, although so named in the plan. Consequently, as in Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682, we held that the regular rate was to be determined by dividing the wages actually paid by the hours actually worked. In so deciding, we expressly noted that Belo was not controlling because the wage plans involved in the two cases posed entirely different questions as to the application of § 7(a).

In Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 65 S.Ct. 1242, 1250, 89 L.Ed. 1705, and Walling v. Harnischfeger Corp., 325 U.S. 427, 65 S.Ct. 1246, 1250, 89 L.Ed. 1711, the contracts established two alternative methods for computing each employee's wages. One was to multiply his straight-time hours of work by a specified basic hourly rate, and his overtime hours by one and one-half that rate, and add the products. The other was to multiply the number of jobs done by a specified piecework rate. The employee was entitled to be paid the greater of these two sums. The method of computing the amount due at piece-work rates, which were constant for work done on both straight-time and overtime hours, of course negated any possible inference that the payment of such amount contemplated legal overtime compensation. The specified hourly rates were so low, however, relative to piecework rates, that the latter were always, or almost always, determinative of the wage actually to be paid. These cases held merely that such specified hourly rates were not the 'regular' rates of wage payments to which they were not related, and which were computed according to a necessarily inconsistent method. Again, Belo was expressly distinguished.

Indeed, it would seem that the Court's opinions in these cases, far from undermining Belo, showed an affirmative concern that language appropriate to the situations then before us should not be extended to the different situation involved in this and the Belo case.

Finally, petitioner maintains that Belo was wrongly decided and that we should 'define the area of (its) continued vitality, if any.' His argument on this score is substantially the same as that advanced on behalf of the Administrator and considered by the Court in the Belo case itself.

The reasons stated in the Belo opinion for rejecting this argument are equally valid today, and need not be repeated. Moreover, our holding in Belo, has been a rule of decision in this Court for five years, and recognized as such on each appropriate occasion. Knowing of the Belo decision, the Congress has permitted § 7(a) to stand unmodified and the courts have applied it as so construed. Employers and employees (including those involved in this case) have regulated their affairs on the faith of it. Even if we doubted the wisdom of the Belo decision as an original proposition, we should not be inclined to depart from it at this time.

Affirmed.

Mr. Justice RUTLEDGE.

I concur in the Court's judgment upon the authority of Walling v. A. H. Belo Corp., 316 U.S. 624, 62 S.Ct. 1223, 86 L.Ed. 1716. I agree with Mr. Justice MURPHY that the Belo decision is inconsistent with later decisions here, in the view it takes concerning the legal effects of the Fair Labor Standards Act. But those cases are distinguishable upon their facts; the Belo case has been relied upon by the parties to this cause and no doubt also by others, in making their arrangements; and the facts here seem to me indistinguishable from those covered by the Belo decision. Accordingly, although I would restrict the effects of that decision narrowly to the factual situation presented, I join in the judgment now rendered.

Mr. Justice MURPHY, with whom Mr. Justice BLACK concurs, dissenting.