of this section, deductions may be made by a contractor or subcontractor or any affiliated person, for membership fees in group benefit or retirement associations; for board and lodging; or for other purposes where the Secretary of Labor concludes the deduction is required by compelling circumstances: Provided, however, The contractor, subcontractor, or any affiliated person does not make a profit or benefit directly or indirectly from the deduction. A copy of the Secretary's decision shall be sent to the applicant and the Federal agency concerned. (e) In accordance with and subject to the standards set forth in subparagraphs (1) through (4) of paragraph (b) of this section, general permission is hereby granted to make payroll deductions for:

(1) The payment of the purchase price of United States Defense Stamps and Bonds and United States Tax Savings Notes;

(2) The repayment of loans to or the purchase of shares in credit unions organized and operated in accordance with District of Columbia, Federal, or State credit union statutes;

(3) Contributions to a Federal governmental or quasi-governmental agency; (4) The payment of dues or premiums to unaffiliated insurance companies or associations for medical or hospitalization insurance where the employer is not required by Federal, State, or local laws to supply such insurance or benefits.

(f) In any case in which the employee does not have full and actual freedom of disposition of his wage payment, whether made in cash or by check, any restricted payment made to the employee is considered a deduction under the regulations in this part.

(g) Nothing herein shall be construed to permit any deduction which the contractor or subcontractor knew, or in the exercise of good faith should have known, did not meet the foregoing standards. In order to insure compliance with this section, the Secretary of Labor may notify the contractor or subcontractor that the deduction will be permitted only if certain conditions with respect thereto are observed. The contractor or subcontractor or any affiliated person shall also comply with such general rules and regulations concerning the deductions as the Secretary of Labor shall make from time to time, notice of which shall have been given to the contractor or subcontractor or any affiliated person making the deduction and to the Federal agency concerned either directly or through publication in the FEDERAL REGISTER.

[7 F. R. 687, as amended at 10 F. R. 7393]

$ 3.6 Regulations part of contract. All contracts made with respect to the construction, prosecution, completion, or repair of any public building or public work or building or work financed in whole or in part by loans or grants from the United States covered by the regulations in this part shall expressly bind the contractor or subcontractor to comply with such of the regulations in this part as may be applicable.

[7 F. R. 687, as amended at 7 F. R. 925]

§3.7 Opinions relating to the regulations. The Secretary of Labor will furnish an opinion regarding the coverage of any specific project or with respect to the application of any provision of the regulations in this part at the request of any Federal or State agency.

§ 3.82 Existing regulations superseded: Effective date. The regulations in this part shall supersede all existing regulations issued under the Copeland Act on April 30, 1942, shall govern all new contracts and all uncompleted portions of contracts and subcontracts which were awarded subsequent to June 13, 1934: Provided, however, That parties to such contracts or subcontracts may comply with the regulations in this part before April 30, 1942.

$3.92 Delegation to the Solicitor of Labor. The Secretary of Labor, in General Order No. 7, dated December 28, 1945, has delegated to the Solicitor of Labor his functions in connection with all correspondence conferences, and matters relative to the administration and interpretation of the Copeland Act.

SECRETARY OF LABOR.

2 Not codified in CFR.

SUPREME COURT OF THE UNITED STATES

No. 22-OCTOBER TERM, 1948

Vermilya-Brown Company, Inc., Necaro Company, Inc.,` et al., Petitioners,

v.

John Joseph Connell, Eugene T. Fitzpatrick, William L.

Flanagan, et al.

[December 6, 1948.]

Mr. JUSTICE REED delivered the opinion of the Court.

On Writ of Certiorari to the United States Court of Appeals for the Second Circuit.

This case brings before us for review the applicability of the Fair Labor Standards Act of 1938, 52 Stat. 1060, to employees allegedly engaged in commerce or the production of goods for commerce on a leasehold of the United States, located on the Crown Colony of Bermuda.

The leasehold, a military base, was obtained by the United States through a lease executed by the British Government. This lease was the result of negotiations adequately summarized for consideration by the letters of The Marquess of Lothian, the British Ambassador to the United States, of date September 2, 1940; the reply of Mr. Cordell Hull, then our Secretary of State, of the same date; and the Agreement of March 27, 1941, between the two nations to further effectuate the declarations of the Ambassador in his letter.1

The Fair Labor Standards Act covers commerce "among the several States or from any State to any place outside thereof." State means "any State of the United States or the District of Columbia or any Territory or possession of the United States." § 3 (b) and (c) of the Act.

Certain employees of contractors who had contracts for work for the United States on the Bermuda base brought this suit under § 16 (b) of the Act for recovery of unpaid overtime compensation and damages, claimed to be due them for the employer's violation of § 7, requiring overtime compensation. We do not enter into any consideration of the employees' right to recover if the Fair Labor Standards Act is applicable to employment on the Bermuda base, for the complaint was dismissed on defendant's motion for summary judgment on the ground that the applicability depended upon the "sovereign jurisdiction of the United States," that the executive and legislative branches of the Government had indicated that such leased areas were not under our sovereign jurisdiction and that this was a political question outside of judicial power. Connell v. Vermilyn-Brown Co., 73 F. Supp. 860. The United States Court of Appeals for the Second Circuit, holding that the Act applied to the Bermuda base, reversed this judgment and remanded the case to the District Court for further proceedings on the merits. 164 F. 2d 924. Our affirmance of his judgment approves that disposition of the appeal. On account of the obvious importance of the case from the standpoint of administration, in view of the number of leased areas occupied by the United States, we granted certiorari. 333 U. S. 859.

(1) We shall consider first our power to explore the problem as to whether the Fair Labor Standards Act covers this leased area. Or, to phrase it differently, is this a political question beyond the competence of courts to decide? Cf. Coleman v. Miller, 307 U. S. 433, 450; Colegrove v. Green, 328 U. S. 549, 552. There is nothing that indicates to us that this Court should refuse to decide a controversy between litigants because the geographical coverage of this statute is involved. Recognizing that the determination of sovereignty over an area is for the legislative an dexecutive departments, Jones v. United States, 137 U. S. 202, does not debar courts from examining the status resulting from prior action. De Lima v. Bidwell, 182 U. S. 1; Hooven & Allison Co. v. Evatt, 324 U. S. 652. We have no occasion for this opinion to differ from the view as to sovereignty expressed "for the Secretary of State" by The Legal Adviser of the Department in his letter of January 30, 1948, to the Attorney General in relation to further legal steps in the present controversy after the judgment of the Court of Appeals. It was there stated:

"The arrangements under which the leased bases were acquired from Great Britain did not and were not intended to transfer sovereignty over the leased areas from Great Britain to the United States."

155 Stat. 1560, 1572, 1576, 1590.

Those documents are published in the Department of State publication No. 1726, Executive Agreement Series 235.

Nothing in this opinion is intended to intimate that we have any different view from that expressed for the Secretary of State. In the light of the statement of the Department of State, we predicate our views on the issue presented upon the postulate that the leased area is under the sovereignty of Great Britain and that it is not territory of the United States in a political sense, that is, a part of its national domain.

(2) We have no doubt that Congress has power in certain situations to regulate the actions of our citizens outside the territorial jurisdiction of the United States whether or not the act punished occurred within the territory of a foreign nation. This was established as to crimes directly affecting the Government in United States v. Bowman, 260 U. S. 94. This Court there pointed out, p. 102, that clearly such legislation concerning our citizens could not offend the dignity or right of sovereignty of another nation. See Blackmer v. United States, 284 U. S. 421, 437; Skiriotes v. Florida, 313 U. S. 69, 73, 78. A fortiori civil controls may apply, we think, to liabilities created by statutory regulation of labor contracts, even if aliens may be involved, where the incidents regulated occur on areas under the control, though not within the territorial jurisdiction or sovereignty of the nation enacting the legislation. This is implicitly conceded by all parties. This power is placed specifically in Congress by virtue of the authorization for "needful Rules and Regulations respecting the Territory or other Property belonging to the United States." Constitution, Art. IV, § 3, cl. 2.3 It does not depend upon sovereignty in the political or any sense over the territory. So the Administrator of the Wage-Hour Division has issued a statement of general policy or interpretation that directs all officers and agencies of his division to apply this Act to the Canal Zone, admittedly territory over which we do not have sovereignty. C. F. R., 1947 Supp., tit. 29, pp. 4392–93.

(3) In this view of the relationship of our government to a leased area, the terms of this particular lease become important. Reference, note 1, supra, has been made to the United States statutes where the title documents are readily available. It is unnecessary to print them here in full. In the margin are extracts that indicate their meaning as to the control intended to be granted.* Under this agreement we have no doubt that the United States is authorized by the lessor to provide for maximum hours and minimum wages for employers and employees within the area, and the question of whether the Fair Labor Standards Act applies is one of statutory construction, not legislative power.

(4) At the time of the enactment of the Act, June 25, 1938, the United States had no leased base in Bermuda. This country did have a lease from the Republic of Cuba of an area at Guantanamo Bay for a coaling or naval station "for the time required for the purposes of cooling and naval stations." The United States was granted by the Cuban lease substantially the same rights as it has

2 No due process question arises from this extension of legislation over such controlled areas such as was considered to bar state action concerning contracts made and to be performed beyond the boundaries of a state. Cf. Home Ins. Co. v. Dick, 281 U. S. 397, 407, with Alaska Packers Assn. v. Comm'n, 294 U. S. 532, 541.

3 Cf. Ashwander v. T. V. A., 297 U. S. 288, 330, et seq.

4 55 Stat. 1560:

Article I, "(1) The United States shall have all the rights, power and authority within the Leased Areas which are necessary for the establishment, use, operation and defence thereof, or appropriate for their control,

Article XI, "(4) It is understood that a Leased Area is not a part of the territory of the United States for the purpose of coastwise shipping laws so as to exclude British vessels from trade between the United States and the Leased Areas.' P. 1565.

Article XIII, "(1) The immigration laws of the Territory shall not operate or apply so as to prevent admission into the Territory, for the purposes of this Agreement, of any member of the United States Forces posted to a Leased Area or any person (not being a national of a Power at war with His Majesty the King) employed by, or under a contract with, the Government of the United States in connection with the construction, maintenance, operation or defence of the Bases in the Territory; but suitable arrangements will be made by the United States to enable such persons to be readily identified and their status to be established." P. 1565.

Article XIV, "(1) No import, excise, consumption or other tax, duty or impost shall be charged on

*

*

*

*

*

"(c) goods consigned to the United States Authorities for the use of institutions under Government control known as Post Exchanges, Ships' Service Stores, Commissary Stores or Service Clubs, or for sale thereat to members of the United States force, or civilian employees of the United States being nationals of the United States and employed in connection with the Bases, or members of their families resident with them and not engaged in any business or occupation in the Territory;' P. 1566.

Article XXIX. "During the continuance of any Lease, no laws of the Territory which would derogate from or prejudice any of the rights conferred on the United States by the Lease or by this Agreement shall be applicable within the Leased Area, save with the concurrence of the United States." P. 1570.

There are also articles arranging for postal facilities and tax exemptions.

73588-56-pt. 1-13

in the Bermuda lease. The time limits of the grant were redefined on June 9, 1934, as extending until agreement for abrogation or unilateral abandonment by the United States. A similar arrangement existed in regard to the Panama Canal Zone. Further, in the Philippine Independence Acts of January 17, 1933, and March 24, 1934, provisions existed looking toward the retention of military and other bases in the Philippine Islands. 47 Stat. 761, §§ 5 and 10; 48 Stat. 456, §§ 5 and 10." A Convention between the governments of Nicaragua and the United States of America, proclaimed June 24, 1916, 39 Stat, 1661, gave the United States for 99 years "sovereign authority" over certain islands in the Caribbean Sea. None of these international arrangements were discussed in reports or the debates concerning the scope of the Fair Labor Standards Act. After the passage of the Fair Labor Standards Act and during World War II, a number of bases for military operations were leased by the United States not only on territory of the British Commonwealth of Nations but on that of other sovereignties also. The provisions of these leases paralleled in many respects the Bermuda lease."

Neither this lack of specific reference in the legislative history to leased areas, however, nor the fact that the particular Bermuda base was acquired after the passage of the Act seems to us decisive of its coverage. "The reach of the act is not sustained or opposed by the fact that it is sought to bring new situations under its terms." The Sherman Act of 1890, a date when we had no insular possessions, was held by its use of the word "Territory" in its § 3 to be applicable in Puerto Rico, a dependency acquired by the Treaty of Paris in 1898." The answer as to the scope of the Wage-Hour Act lies in the purpose of Congress in defining its reach.

(5) The point of statutory construction for our determination is as to whether the word "possessions," used by Congress to bound the geographical coverage of the Fair Labor Standards Act, fixes the limits of the Act's scope so as to include the Bermuda base. The word "possession" is not a word of art, descrip

51 Malloy, Treaties, Conventions, International Acts, Protocols and Agreements (S. Doc. 357, 61st Cong., 2d Sess.) 359:

"While on the one hand the United States recognizes the continuance of the ultimate Sovereignty of the Republic of Cuba over the above described areas of land and water, on the other hand the Republic of Cuba consents that during the period of the occupation by the United States of said areas under the terms of this agreement the United States shall exercise complete jurisdiction and control over and within said areas with the right to acquire (under conditions to be hereafter agreed upon by the two Governments) for the public purposes of the United States any land or other property therein by purchase or by exercise of eminent domain with full compensation to the owners thereof.

Id., 361. See Joint Resolution No. 24, April 20, 1898, on the recognition of the independence of Cuba, 30 Stat. 738; the Act of March 2, 1901, in fulfillment thereof, 31 Stat. 898, Art. VII; Treaty with Cuba proclaimed June 9, 1934, 48 Stat. 1682, 1683, Art. III. 6 Isthmian Canal Convention, 33 Stat. 2234:

"The United States of America and the Republic of Panama being desirous to insure the construction of a ship canal across the Isthmus of Panama to connect the Atlantic and Pacific oceans, and the Congress of the United States of America having passed an act approved June 28, 1902, in furtherance of that object, by which the President of the United States is authorized to acquire within a reasonable time the control of the necessary territory of the Republic of Colombia, and the sovereignty of such territory being actually vested in the Republic of Panama, the high contracting parties have resolved for that purpose to conclude a convention and have accordingly appointed as their plenipo tentiaries, Id., 2235:

"Article III.

"The Republic of Panama grants to the United States all the rights, power and authority within the zone mentioned and described in Article II of this agreement and within the limits of all auxiliary lands and waters mentioned and described in said Article II which the United States would possess and exercise if it were the sovereign of the territory within which said lands and waters are located to the entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power or authority."

Through the Joint Resolution of June 29, 1944, 58 Stat. 625, these provisions were effectuated in leases for 99 years by an agreement of March 14, 1947. 61 Stat., Treaties and International Acts No. 1611. The rights of control over the areas obtained by the United States from the Republic of the Philippines are quite similar to those obtained over the Bermuda base.

8 The power of control over leased areas obtained by the United States through the above leases is not greater than that ordinarily exercised by sovereign lessees of foreign territory. See 34 American Journal of International Law 703; Lawrence, Frinciples of International Law (6th ed., 1915) 175; H. Doc. No. 1, 56th Cong., 2d Sess., 386; Oppenheim's International Law (6th ed. by Lauterpacht, 1947) 412-14. Oppenheim contains numerous illustrations of leases by an owner-state to a foreign power. His views upon the leases of the bases herein referred to correspond to that of our Department of State and to the postulate as to sovereignty stated in this opinion.

E. g., 55 Stat. 1245, Executive Agreement Series 204 (Greenland); 56 Stat. 1621, Executive Agreement Series 275 (Liberia).

10 Browder v. United States, 312 U. S. 335, 339; Barr v. United States, 324 U. S. 83, 90, 11 Puerto Rico v. Shell Co., 302 U. S. 253, 257.

tive of a recognized geographical or governmental entity. What was said of "territories" in the Shell Co. case, 302 U. S. 253, at 258, is applicable:

"Words generally have different shades of meaning, and are to be construed if reasonably possible to effectuate the intent of the lawmakers; and this meaning in particular instances is to be arrived at not only by a consideration of the words themselves, but by considering, as well, the context, the purposes of the law, and the circumstances under which the words were employed."

12

The word "possessions" has been employed in a number of statutes both before and since the Fair Labor Standards Act to describe the areas to which various congressional statutes apply. We do not find that these examples sufficiently outline the meaning of the word to furnish a definition that would include or exclude this base. While the general purpose of the Congress in the enactment of the Fair Labor Standards Act is clear,13 no such definite indication of the purpose to include or exclude leased areas, such as the Bermuda base, in the word "possession" appears. We cannot even say, "We see what you are driving at, but you have not said it, and therefore we shall go on as before." Under such circumstances, our duty as a Court is to construe the word "possession" as our judgment instructs us the lawmakers, within constitutional limits, would have done had they acted at the time of the legislation with the present situation in mind.

99 14

The word "possession" in the Act includes far off islands whose economy differs markedly from our own. Thus the employees of Puerto Rico, Guam, the guano islands, Samoa and the Virgin Islands have the protection of the Act. See C. F. R. 1947, Supp., 4393. Since drastic change in local economy was not a deterrent in these instances, there is no reason for saying that the wage-hour provisions of the Act were not intended to bring these minimum changes into the labor market of the bases. Since its passage of the Act, Congress has extended the coverage

15

12 Federal Employers' Liability Act, 35 Stat. 65. § 2, 45 U. S. C. 52 (1908) ("Every common carrier by railroad in the Territories, the District of Columbia, the Panama Canal Zone, or other possessions of the United States .");

Neutrality Act, 40 Stat. 231, § 1, 18 U. S. C. 39 (1917) ("The term 'United States' includes the Canal Zone and all territory and waters, continental or insular, subject to the jurisdiction of the United States.");

Bank Conservation Act, 48 Stat. 2, § 202, 12 U. S. C. 202 (1933) (“. the term 'State' means any State, Territory, or possession of the United States, and the Canal Zone."); Federal Communications Act, 48 Stat. 1064, 1065, § 3 (g), as amended, 47 U. S. C. 153 (g) (1934) (“United States' means the several States and Territories, the District of Columbia, and the possessions of the United States, but does not include tht Canal Zone.");

Food, Drug & Cosmetic Act, 52 Stat. 1040, § 201 (a), 21 U. S. C. 321 (a) (1938) ("The term "Territory' means any Territory or possession of the United States, including the District of Columbia and excluding the Canal Zone.");

Firearms Act, 52 Stat. 1250, § I (2), as amended, 15 U. S. C. 901 (2) (1938) ("The term 'interstate or foreign commerce' means commerce between any State, Territory, or possession (not including the Canal Zone) or the District of Columbia, and any place outside thereof; . . .");

Investment Company Act, 54 Stat. 795, § 2 (a) (37), as amended, 15 U. S. C. 80a-2 (37) (1940) ("State' means any State of the United States, the District of Columbia, Alaska, Hawaii, Puerto Rico, the Canal Zone, the Virgin Islands, or any other possession of the United States.");

Nationality Act, 54 Stat. 1137, § 101 (e), 8 U. S. C. 501 (e) (1940) ("The term 'outlying possessions' means all territory over which the United States exercises rights of sovereignty, except the Canal Zone.");

War Damage Corporation Act, 56 Stat. 174, 176, § 2, 15 U. S. C. 606b-2 (a) (1942) ("Such protection shall be applicable only (1) to such property situated in the United States (including the several States and the District of Columbia), the Philippine Islands, the Canal Zone, the Territories and possessions of the United States, and in such other places as may be determined by the President to be under the dominion and control of the United States. .")

The War Damage Corporation Act and the Defense Base Act, 56 Stat. 1035, 42 U. S. C. 1651 (1942), infra, note 16, use terms different from "possession" to describe these leased areas. When these acts were passed, however, the problems posed by the bases were specifically considered by Congress. Hearings on H. R. 6382, House of Representatives, 77th Cong., 2d Sess., p. 27: 88 Cong. Rec. 1851. Thus they afford no touchstone as to the meaning of the Fair Labor Standards Act, where such problems were not specifically considered.

13 United States v. Darby, 312 U. S. 100, 115:

"The motive and purpose of the present regulation are plainly to make effective the Congressional conception of public policy that interstate commerce should not be made the instrument of competition in the distribution of goods produced under substandard labor conditions, which competition is injurious to the commerce and to the states from and to which the commerce flows."

Substandard conditions included excessive hours of labor. Overnight Motor Co. v. Missel, 316 U. S. 572, 577.

14 Johnson v. United States, 163 F. 30, 32.

15 When Congress dealt with coverage in the National Labor Relations Act, enacted July 5, 1935, 49 Stat. 449, 450, it used a narrower definition of commerce, one restricted to States and Territories. That has been held to cover Puerto Rico but we are not advised of any application to the bases. Cf. Labor Board v. Gonzales Padin Co., 161 F. 2d 353.