AMENDING THE FAIR LABOR STANDARDS ACT OF 1938 WEDNESDAY, MAY 18, 1955 UNITED STATES SENATE, COMMITTEE ON LABOR AND PUBLIC WELFARE, SUBCOMMITTEE ON LABOR, The subcommittee met, pursuant to adjournment, at 10 a. m., in room P-63, United States Capitol, Senator Paul H. Douglas (chairman), presiding. Present: Sentors Douglas, Smith of New Jersey, and Allott. Also present: Stewart E. McClure, staff director; Roy E. James, minority staff director; John S. Forsythe and Michael J. Bernstein, professional staff members, and Dr. Fred H. Blum, consultant. Senator DOUGLAS. The subcommittee will come to order. I would like to read a telegram which we have received from Archbishop Lucey of San Antonio, whom we invited to testify on the question of migratory workers in agriculture. I will read the telegram so that it will be in the record at this point. The telegram is as follows: Migratory workers in American agriculture are defenseless against the greed and injustice of dishonest employers. On the one hand, the powerful organizations of growers and farm groups, on the other hand, unorganized and inarticulate working men and women who wander across our country seeking employment by which to live. Some employers of migratory labor are honest. Others are barbarians. Minimum-wage legislation would tend to equalize production costs and compel criminal employers to act like civilized human beings. These exploiters of honest working people seem not to be influenced by God's commandments, but Federal justice and the shadow of retribution will command their respect. I speak for hundreds of thousands of American citizens, men, women, and children, who have no voice in their employment, and whose wretched condition is a disgrace to our Nation. Only Congress can help them. ROBERT E. LUCEY. SAN ANTONIO, TEX. Now, Mr. Rothman, we are very happy to welcome you and your colleagues here, and I understand that you are to introduce the various members of your Department. But before we proceed to that I should like to clear up the question as to the attitude of the Department of Labor on the coverage of the law, and I will begin by quoting the testimony of Secretary Mitchell when he appeared before us on Thursday, April 14. I read from the transcript: In these areas a broadening of minimum-wage coverage under the act would retain in principle the present definition of commerce under the act because these areas will be immediately recognized as so much dependent upon interstate commerce as to be from anyone's viewpoint a basic and integral part of commerce or the production of goods for commerce. The areas to which I refer are multi-State enterprises, which have grown vastly in past years, and other businesses which engage to a major extent in commerce or in the production of goods for commerce. The close and direct relationship of these enterprises to the interstate activities with which the act is concerned seems very clear. No sound reason appears why the act should not apply throughout these businesses which are controlled on an interstate basis. The claim may rightly be made that industries of such interstate character are already covered under the present language of the act. However, coverage of these industries is spotty due to the fact that it is on an individual employee basis rather than on an enterprise basis. Many employees in need of a minimum wage who do not now have it work in units of the vast interstate department stores, variety stores, and grocery chains, nationwide motion picture theater chains, interstate hotel systems, and loan companies. (The above quotation is from Secretary Mitchell's testimony on page 43, Part 1 of the hearings.) Senator DOUGLAS. I asked about the American Telephone & Telegraph Co. Secretary Mitchell said they were now covered, and that that was true of Western Union. Secretary Mitchell continued: I am making these two specific recommendations that the committee might especially consider. Also, in accordance with President Eisenhower's statement that we consider how many additional people might be covered as well as these. The committee might well look at those special areas that were especially exempted in the 1949 act to see whether or not it wishes to reconsider those. Senator DOUGLAS. But in the main it is the chains, interstate chains. Secretary MITCHELL. I am making specific reference here to interstate chains. Secretary MITCHELL. Yes, variety stores, food chains. Secretary MITCHELL. I don't know what the organizational makeup of Rexall is. I don't know whether they are individually owned. Senator DOUGLAS. What about gasoline stations? Secretary MITCHELL. There, again, I don't know whether these are multistate operations. Senator DOUGLAS. The test is ownership, then? Secretary MITCHELL. I would think so. Senator DOUGLAS. Not common management? Secretary MITCHELL. The test should be ownership and control. Senator DOUGLAS. Of course you may have ownership diffused and control centralized. What are you going to do then? Secretary MITCHELL. Well, I think that is something the committee might want to study. These multistate enterprises are basically not local or intrastate in most important characteristics, including ownership, control, financing, management, and personnel policy. Side by side with the many neighborhood or "friendly corner merchant" enterprises, and in strong contrast to them, are a relatively few firms operating the interstate chains. These few, by virtue of their size, have an importance and significance far out of proportion to their numbers. The retail chains provide a good illustration of the point that I should like to make. Of the 1.4 million retail firms in the United States, only 31,000, or slightly more than 2 percent, are multistate enterprises. Yet these interstate chains employ 34 percent of the industry's employees. Senator DOUGLAS. Isn't it probably true that they do more than 34 percent of the business? Secretary MITCHELL. I don't know, sir. Senator DOUGLAS. You would normally think that sales per employee would be greater in the chains which are larger stores than in the corner grocery or corner drugstore? Secretary MITCHELL. That may be. An establishment owned or directly controlled by an interstate chain is a unit of an enterprise whose operations are in the stream of interstate commerce and whose labor standards directly affect interstate standards. The huge size and increasingly diversified operations of these enterprises are in a large measure dependent upon the rapid and progressive strides made by this Nation in the fields of interstate communication and transportation. They are obviously engaged in commerce affecting more States than one. Such commerce, under the Constitution, is appropriate for regulation by the Federal Government. The Federal Government should not regulate those enterprises which are essentially local in character; this field should be left to the States. The small neighborhood grocery, barbershops, drugstores, and the small country store, and other small enterprises, are not properly subject to Federal legislation. They are traditionally within State jurisdiction because they are largely outside the stream of interstate competition. In order to expand coverage to interstate enterprises, it would be necessary to include specifically in the general coverage any employee employed by a business, establishment, or enterprise which is part of an interstate enterprise operating business establishments in different States. By "interstate enterprise," I mean any enterprise in which business establishments under common ownership or financial control are operated in more than one State. If employees of multistate enterprises are to be given the protection of the minimum wage, it would also be necessary to remove outlets of interstate chains from the complete minimum wage exemption in the act for retail and service establishments. This would give effective minimum wage coverage for the first time to an estimated 2.1 million employees. Of these, about 1.7 million are employed in units of interstate chain store enterprises, and an estimated 196,000 of the others are in hotel, motion picture, and other interstate service chains. These changes would leave unaffected the many retail and service establishments that are primarily local in character. Even the largest local establishments operating within a State would remain under the exemption which now applies to them. Nor would coverage be extended to an individually owned and controlled establishment merely because it is operating under a franchise from a national enterprise or enters into a voluntary arrangement with other independent establishments to purchase or advertise on a group basis. Further, even in the case of multistate retail or service enterprises being newly covered, there would be no requirement that they comply with the overtime provisions of the act. Senator DOUGLAS. Mr. Secretary, I can see that the problem of drafting any such regulation as that which you are now making would be very difficult, and I wonder if your Department, the Solicitor, would submit technical language to cover your statement? Secretary MITCHELL. We would be happy to, sir. Senator DOUGLAS. Thank you. Secretary MITCHELL. The other area the subcommittee may wish to consider involves those enterprises that do most of their business in interstate commerce but have some employees who are not subject to the act. (The preceding colloquy appears originally on pages 44-46, Part 1 of the hearings.) Then I continued the questioning as follows: I would like to begin, Mr. Secretary, by asking this question: We know that the President has recommended a 90-cent minimum wage. Does this recommendation of yours for the 90-cent minimum wage carry with it the enforcement of the administration, or is it simply your recommendation? Secretary MITCHELL. What I am stating here in entirety is the administration's proposal. The entire statement is the administration's proposal. Senator DOUGLAS. They are recommending the expanded coverage, then? Secretary MITCHELL. That is right. I think the evidence is clear, and certainly there is a common understanding of everyone that the Secretary recommended extended coverage of interstate enterprises of a retail, entertainment, and service. character. Now, on May 13, I received a letter from the Secretary, and in the third paragraph we have the following statement Senator SMITH. Mr. Chairman, I suggest that whole letter be put in, and then if you want to emphasize the third paragraph Senator DOUGLAS. We have placed it in the record. I did put it The third paragraph reads as follows: At the time of my testimony before your subcommittee I suggested two areas to which in your overall study of bringing into the protection of the act more workers you might wish to give your special consideration. These were the multi-State enterprises, and those enterprises that do the greater part of their business in commerce or in the production of goods for commerce. As I made clear at the time, these suggestions were advanced in view of your study of the entire problem of coverage, and in order that you might study these areas in connection with the total problem rather than isolationist areas to which your consideration should be exclusively directed. (The letter in its entirety appears on pp. 1480-81.) Now, the question I want to ask is this: What is the present position of the Department of Labor? Does it recommend extended coverage to chain stores, chain hotels, chain theaters, or not? FURTHER STATEMENT OF STUART ROTHMAN, SOLICITOR OF THE DEPARTMENT OF LABOR Mr. ROTHMAN. Senator Douglas, Senator Smith, and Senator Allott, I am pleased to return to testify before this subcommittee on expanding the minimum wage and increasing the amount of the mini mum wage. I would like to call to the attention of Senator Douglas that he started to read from the Secretary's testimony at the middle of the page. If the Senator will allow me, I would like to read all of the paragraph. That paragraph reads as follows: I have mentioned that there are now large groups of employees who are not protected by a minimum wage even though they could be covered by the act. Some of these groups have never been covered and some are specifically exempted. President Eisenhower has said in his Economic Report that it would be well for the Congress to consider the question of bringing substantial numbers of workers now excluded from the protection of a minimum wage, under its coverage. The Department will be glad to supply any information or materials of value to the subcommittee which it may wish for such a study. There are two areas of possible expanded coverage that I would like to talk further about because they seem to be areas to which you may wish to give your particular attention and special consideration. (The paragraph above originally appears on page 43, Part 1 of the hearings.) The testimony then goes on as Senator Douglas has read. I would also like to call the attention of the subcommittee to a statement of the Secretarly in reply to a question of Senator Smith. Senator Smith asked: And you are not advocating or even suggesting any other areas of expansion? Secretary MITCHELL. I assume that the committee and the Congress will examine all areas of possible expansion. These particular two we suggest serious consideration of. (The above colloquy appears on page 59. Part 1 of the hearings.) I think that it is clear from the testimony what Secretary Mitchell said to this subcommittee. He said he thought Congress ought to study the expansion of coverage, and he suggested-and you can put it in the terms of a recommendation, that Congress consider in their total consideration of the expansion of coverage two areas, the area of multi-State enterprises, and the area where the establishment does most of its business in interstate commerce the majority He said it is a matter for Congress to determine the total degree of expansion that it wants, and his comments were a suggestion that it consider these areas. I would also like to call the attention of the committee specifically to what the Secretary has said in his comments on Senate bill 662 and Senate bill 770, transmitted to the chairman of the committee under date of May 9. He said the following Senator SMITH. Would you tell us just briefly who introduced those bills? Mr. ROTHMAN. Senate bill 662 was introduced by Senator Lehman, and Senate bill 770 by Senator Murray. Senator SMITH. Those were the ones that had the broader coverage? Mr. ROTHMAN. They included coverage using the formula, among other things, of "affecting commerce," and recommended a minimum wage of $1.25 plus in the case of the Murray bill some escalation. Secretary Mitchell said this: I am strongly in favor of the general objective of bringing many additional workers under the minimum wage. As I made clear in my testimony of April 14, 1955, before the Subcommittee on Labor, this administration favors a reversal of the process of providing a higher minimum wage for fewer workers and believes that the Congress should give its consideration to proposals for bringing substantial numbers of workers now excluded from the protection of the minimum wage under its coverage. President Eisenhower has since emphasized this at his press conference on April 27, 1955. To further this objective in my testimony before the subcommittee I recommended that consideration be given to the extension of minimum wage protection in line with the purposes of the act to many more workers who are in need of it, and to groups of employees whoe inclusion under the minimum wage would remove existing inequities in the acts covered in the exemption. In this particular area I mentioned two particular areas of coverage extension in which minimum wage protection could be made effective for the first time for more than 2 million workers in enterprises vitally connected with the commerce which the present law is intended to cover. I suggested that the Congress might wish to give special and particular consideration to these specific areas in its examination of the overall problem of coverage extension. I hope that the subcommittee will give serious consideration to these recommendations and suggestions. I would also like to call the attention of the subcommittee to another paragraph that appears in the Secretary's letter: As I emphasized in my testimony before the subcommittee the Secretary said Senator SMITH. This is the letter of the 13th? Mr. ROTHMAN. The letter of May 9. The letter in which he transmitted his comments upon the Murray bill and the Lehman bill from which I have been quoting. I repeat: As I emphasized in my testimony before the subcommittee, the act's objective to eliminate conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and well-being of workers, cannot be achieved for low-paid workers in need of minimum-wage protection by the setting of a minimum rate so high as to cause substantial curtailment of employment among them, and the policy statement in the act so recognizes. To the extent that the rate is increased to a level that will substantially curtail employment and earning power of workers now protected by the 75-cent minimum wage it becomes even more difficult to give minimum-wage protection to the low-paid workers who do not now have it and are most in need of it. Particularly in those industries where the lack of a minimum wage has permitted the earnings of many workers to remain below the level of the present minimum rate. In my view the adoption of $1.25 minimum wage would not only be a strong deterrant to the extension of coverage recommended by the President, but would increase the likelihood of further amendments to bring about con |