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(a) Section 11 of the Portal Act provides that in any action brought under the Fair Labor Standards Act to recover unpaid minimum wages, unpaid overtime compensation, or liquidated damages, the court may, subject to prescribed conditions, in its sound discretion award no liquidated damages or award any amount of such damages not to exceed the amount specified in section 16 (b) of the Fair Labor Standards Act.

(b) The conditions prescribed as prerequisites to such an exercise of discretion by the court are two: (1) The employer must show to the satisfaction of the court that the act or omission giving rise to such action was in good faith; and (2) he must show also, to the satisfaction of the court, that he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act. If these conditions are met by the employer against whom the suit is brought, the court is permitted, but not required, in its sound discretion to reduce or eliminate the liquidated damages which would otherwise be required in any judgment against the employer. This may be done in any action brought under section 16 (b) of the Fair Labor Standards Act, regardless of whether the action was instituted prior to or on or after May 14, 1947, and regardless of when the employee activities on which it is based were engaged in. If, however, the employer does not show to the satisfaction of the court that he has met the two conditions mentioned above, the court is given no discretion by the statute, and it continues to be the duty of the court to award liquidated damages.

(c) What constitutes good faith on the part of an employer, and whether he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act are mixed questions of fact and law, which should be determined by objective tests. Where an employer makes the required showing, it is for the court to determine in its sound discretion what would be just according to the law on the facts shown.

(d) Section 11 of the Portal Act does not change the provisions of section 16 (b) of the Fair Labor Standards Act under which attor

» Sec. 16 (b) of the Fair Labor Standards Act provides that an employer who violates the minimum-wage or overtime provisions of the act shall be liable to the affected employees not only for the amount of the unpaid minimum wages or unpaid orertime compensation, as the case may be, but also for an additional equal amount as liquidated damages. The courts have held that this provision is "not penal in its nature" but rather that such damages "constitute compensation for the retention of a workmen's pay" where the required wage#gre pot paid "on time." Under this provision of the law, the courts have held that the liability of an employer for liquidated damages in an amount equal to his underpayments of required wages becomes fixed at the time he fails to pay such wages when due and the courts were given no discretion, prior to the enactment of the Portal-to-Portal Act, to relieve him of any portion of this liability. See Brooklyn Savings Bank v. O'Neil, 824 U. S. 697; Overnight Motor Transp. Co. v. Missel, 316 U. S. 572.

39 Seo Conference Report, p. 17; remarks of Representative Walter, 1947 Cong. Rec. 1550 ; President's message of May 14, 1947, to the Congress on approval of the Portal Act.

* Cl. secs. 790.18-790.16 of this bulletin.

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PROVISIONS RELATING TO CERTAIN ACTIVITIES

ENGAGED IN BY EMPLOYEES BEFORE MAY 14, 1947
SECTION 790.23. LIABILITY OF EMPLOYER; EFFECT OF CONTRACT,

CUSTOM, OR PRACTICE
(a) Section 2 of the Portal Act, which relates to activities engaged
in by employees prior to the effective date of the act, was designed
to meet the problem which Congress found had arisen as a result of
existing "portal-to-portal" claims." Subsections (a) and (b) of this
section provide as follows:

(a) No employer shall be subject to any liability or punishment under the Fair Labor Standards Act of 1938, as amended,

(in any action or proceeding commenced prior to or on or after the date of the enactment of this Act), on account of the failure of such employer to pay an employee minimum wages, or to pay an employee overtime compensation, for or on account of any activity of an employee engaged in prior to the date of the enactment of this Act, except an activity which was compensable by either

(1) an express provision of a written or nonwritten contract in effect, at the time of such activity, between such employee, his agent, or collectivebargaining representative and his employer; or

(2) a custom or practice in effect, at the time of such activity, at the establishment or other place where such employee was employed, covering such activity, not inconsistent with a written or nonwritten contract, in effect at the time of such activity, between such employee, his agent, or collective-bargaining representative and his employer. (b) For the purpose of subsection (a), an activity shall be con compensable under such contract provision or such custom or practice only when it was engaged in during the portion of the day with respect to which it was so made compensable. It will be noted that the above language contains certain words and phrases which are similarly used in section 4 of the act, relating to future claims. Reference is made to the discussion of that section for comments as to the meaning and effect of such terms. The discussion of these provisions which follows is confined to certain general comments.

(b) Like section 4 of the act, previously discussed, section 2 affords relief to employers from liability or punishment to which they might otherwise be subject because they did not pay their employees in accordance with the Fair Labor Standards Act for or on account of certain activities which were, at the time of performance, not compensable either by contract or by a custom or practice as described in the statute. A major difference is that section 2 refers only to activities performed before May 14, 1947 (the effective date of the act) while section 4 is concerned only with activities performed on or after that date. Although the same criteria of contract, custom, and prac

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* See Portal Act, sec. 1 ; Conference Report, pp. 9, 10; House Report, pp. 1-6 ; Senate Report, pp. 1-45; statement of Representative Gwynne, 1947 Cong. Rec. 4513; statements of Senator Wiley, 1947 Cong. Rec. 2151-2156, 4397; statements of Senator Donnell, 1947 Cong. Rec. 2196, 2197.

12 See secs. 790.4, 790.9-790.12 of this bulletin,

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tice are used to determine compensability,43 the provisions of section 2 (a), (b) of the Portal Act differ from the corresponding provisions of section 4, relating to future claims, in that their scope is not confined to activities engaged in outside the workday proper, but extends to such activities engaged in at any time during the 24 hours of the day." However, it is apparent from the statutory language and the legislative history that the quoted provisions were intended to carry out the policy expressed in section 1 of the act and were not intended to relieve an employer from liability or punishment for failing to pay compensation as required by the fair Labor Standards Act for or on account of any activities of his employees which were compensable in any amount under a contract, custom, or practice of the kind described in subsection (a),45 even though such activities were so-called "portal-to-portal” activities. 46

(c) It will be noted that the relief afforded employers by the provisions quoted in paragraph (a) above is relief from liability or punishment "in any action or proceeding."

Whether the relief thus provided is available to a particular employer in a given fact situation would, therefore, seem to be a matter for determination in such an action or proceeding on the basis of the proof made therein. The language "any action or proceeding” indicates that, with respect to activities performed before May 14, 1947, these provisions apply in accordance with their terms in any action or proceeding to enforce liability or impose punishment on the employer, whether commenced before or on or after such date. 48

" 47

SECTION 790.24. EFFECT OF PORTAL ACT ON DETERMINATION OF HOURS

WORKED PRIOR TO MAY 14, 1947

(a) Section 2 (c) of the Portal Act provides as follows:

(c) In the application of the minimum wage and overtime compensation provisions of the Fair Labor Standards Act of 1938, as amended,

in determining the time for which an employer employed an employee there shall be counted all that time, but only that time, during which the employee engaged in activities which were compensable within the meaning of subsections (a) and (b) of this section. (Italics supplied.) 49 This provision relates to the determination of hours worked prior to May 14, 1947. The effect of the Portal Act on the determination of hours worked under the Fair Labor Standards Act after that date is discussed at another point in this bulletin.50 Under the terms of the quoted provision, time spent by employees prior to the enactment of the latter act in activities which were not compensable by contract, custom, or practice within the meaning of the Portal Act is to be ex

63 See secs. 790.5 (b), 790.10-790.14 above. 44 See statements of Senator Donnell, 1947 Cong. Rec. 2196, 2255, 2440. 45 See Conference Report, pp. 9, 10; 1947 Cong. Rec. 1621, 1623, 1629, 2194, 2196, 2197, 2200, 2203, 2252, 2253, 2370, 2371, 2373, 2378, 2383, 2384. See also the President's message on approval of the Portal-to-Portal Act, May 14, 1947.

** See colloquy between Senators Tydings and Donnell, 1947 Cong. Rec. 2196; colloquy between Senators Lodge, Donnell, and Hawkes, 1947 Cong. Rec. 2252, 2253.

47 The quoted language does not appear in the corresponding provisions of sec. 4, relating
to future claims. See sec. 790.4 of this bulletin.

46 See Conference Report, p. 9,
49 Subsecs. (a) and (b) are discussed in sec. 790.23 of this bulletin.
Bo See secs. 700.5–790.8 of this bulletin,

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cluded in computing worktime for purposes of determining whether the minimum wage and overtime requirements of the Fair Labor Standards Act were met.51 On the other hand, time that constituted hours worked, which was devoted to activities which were so compensable, is not removed by these provisions from the category of time worked, for purposes of the Fair Labor Standards Act; the statute expressly provides that all such time shall be counted in computing hours worked.52

(b) In determining time worked prior to May 14, 1947, in accordance with the provision quoted in paragraph (a) above, regard must be had to the “portion of the day” provisions of section 2 (b) of the Portal-to-Portal Act as well as the more general provisions of section 2 (a).53 SECTION 790.25. JURISDICTION OF COURTS LIMITED AS TO WAGE CLAIMS

FOR PERIODS PRIOR TO May 14, 1947 (a) Section 2 (d) of the Portal Act provides that: No court of the United States, of any State, Territory, or possession of the United States, or of the District of Columbia, shall have jurisdiction of any action or proceeding, whether instituted prior to or on or after the date of the enactment of this Act, to enforce liability or impose punishment for or on account of the failure of the employer to pay minimum wages or overtime compensation under the Fair Labor Standards Act of 1938, as amended,

to the extent that such action or proceeding seeks to enforce any liability or impose any punishment with respect to an activity which was not compensable under subsections (a) and (b) of this section."

(b) It will be noted that this provision of the act limits the jurisdiction of both Federal and State courts in all such actions or proceedings whether commenced before or after the enactment of the act. It is important to bear in mind that this provision does not affect the jurisdiction of any court in any action or proceeding insofar as it is based on failure to pay minimum wages or overtime compensation for any activities engaged in by employees on or after May 14, 1947. This limitation of jurisdiction affects only those actions or proceedings in which it is sought to enforce liability or impose punishment on an employer for, or on account of, his failure to pay, the required minimum wages or overtime compensation for activities engaged in by employees during periods prior to May 14, 1947, and then only to the exient that such activities were not compensable by contract, custom, or practice as provided in subsections 2 (a) and 2 (6) of the Portal Act.55

51 This aspect of the quoted provision is, as explained in the Conference Report, intended to make clear, as was done in sec. 2 of the Senate amendment to the bill (H. R. 2157) 818 passed by the House of Representatives (not contained in the bill as finally enacted), that no judicial or administrative interpretation will have the effect of including as worktime other time which was not made compensable by contract, custom, or practice. Conference Report, p. 10.

62 The purpose of this portion of the quoted provision, as explained by the Conference Committee, is to emphasize that employers are not relieved from liability for the payment of minimum wages and overtime compensation for any time during which the employee engaged in activities compensable under contract, custom, or practice as provided in the statute. Sec. 3 of the Senate amendment, which so provided, was omitted under the conference agreement as surplusage, and as fully covered by sec. 2 (c) of the bill as agreed to in conference. Conference Report, p. 10.

63 These provisions are quoted in sec. 790.23 above. See also Conference Report, p. 10, and cf. sec. 790.12 of this bulletin.

84 The text of subsecs. (a) and (b) appears above in sec. 790.23 (a) of this bulletin. 65 See in this connection, secs. 790.23 and 790.24 of this bulletin.

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The denial of jurisdiction is “not applicable to actions or proceedings in which judgment has become final prior to the date of the enactment" of the act. 56

(c) It appears from the language quoted above that the jurisdiction of the courts with respect to an

action or proceeding remains unaffected by this provision to the extent that such an action or proceeding seeks to impose liability or punishment either (1) for failure to pay wages in accordance with the Fair Labor Standards Act for or on account of activities which were compensable by contract, custom, or practice as provided in sections 2 (a), (b) of the Portal Act, or (2) for child labor or other violations of the Fair Labor Standards Act where no liability or punishment is sought to be imposed "for or on account of the failure of the employer to pay minimum wages or overtime compensation."

SECTION 790.26. PROHIBITION OF ASSIGNMENTS Assignees of employees' causes of action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages under the Fair Labor Standards Act have, in the past, been allowed to recover in some cases where such assignments are permitted by local law, on the theory that the act does not expressly or by implication forbid such assignments and that they do not contravene public policy. Certain such assignments are now prohibited by section 2 (e) of the Portal Act.68 This section expressly refers only to causes of action which accrued 59 prior to May 14, 1947, and applies only “to the extent that” such a cause of action is based on an activity which was not compensable” under contract, custom, or practice within the meaning of the provisions of section 2 (a) and 2 (b) of this act.60 To the extent that such a cause of action is based on such an activity, section 2 (e) provides that neither it nor "any interest in” it “shall hereafter be assignable, in whole or in part.”. As explained in the Conference Report, this provision will render it impossible for anyone (even though permitted to do so under State law) to buy up existing claims which were not compensable under contract, custom, or practice, with the hope of compromising such claims at a profit under the provisions of section 3 of the act.62

SECTION 790.27. COMPROMISE OF CLAIMS EXISTING PRIOR TO May 14, 1947

(a) Section 3 of the Portal Act authorizes compromises of certain claims on causes of action under the Fair Labor Standards Act which accrued before enactment of the Portal Act, as follows:

(a) Any cause of action under the Fair Labor Standards Act of 1938, as amended,

which accrued prior to the date of the enactment of this Act, or any action (whether instituted prior to on or after the date of the enactment of this Act) to enforce such a cause of action, may hereafter be compro

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56 Conference Report, p. 11.

67 Steiner v. Pleasantville Constructors, Inc., 9 Labor Cas. (C. C. H.), par. 66,902. Cf. Titur v. Wallick, 306 U. S. 282.

B8 Cf. sec. 5 of the act, discussed in sec. 790.20 of this bulletin. 68 As to meaning of "accrued," see the discussion in sec. 790.21 (b) of this bulletin. 60 These provisions are discussed in sec. 790.23 of this bulletin. 61 Conference Report, p. 11.

See the discussion of sec. 3 In sec. 790.27 of this bulletin.

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