Back wages owed and restitution agreed to under the Fair Labor Standards Act and the Public Contracts Act, 1945-48, by fiscal year

Mr. WERDEL. Under that provision let us take this case: Let us say an employer thinks he is not under the act. He is paying $1.50 an hour to 50 employees. And instead of working them 40 hours a week, he is working them 60.

Under those circumstances, he would be paying a total of $75 a week wages to those employees.

Mr. WEISS. No; it would be $90.

Mr. WERDEL. In other words, he would be off $35 per day on salary. He would be paying $75 an hour; that is what he would be paying$75 an hour for wages to the 50 employees. And under the act, if he had known he was under the act, what he should have done, probably, was to pay $1.20, and time and a half for overtime, whatever occurred; but he, in a bona fide action, paid him a flat rate of $1.50. He is off, then, about $35 an hour from the amount that he should have paid. When you multiply that on through to the weeks, for the week he is out, and owing the employees with the bonus $1,400 per week, which amounts to $72,800 a year for 50 employees, and your statute of limitations is 4 years. Here is a bona fide man who is going to be hit for $291,200 employing only 50 men.

Mr. McCOMB. You do not suggest that he be excused?

Mr. WERDEL. No.

Mr. McCOMB. I assume you are wondering whether he should have paid.

Mr. WEISS. He would have reduced the wages, because of the overtime requirements. That was not the intention of the act, that the rate would be reduced by the overtime requirements. What happened in 99 percent of the cases is that they maintain the rate, and pay the overtime on it.

Mr. WERDEL. The point I am making is that a man employing 50 persons hires them for 60 hours a week, thinking he is not under the act, on the advise of his attorney, and their employees are satisfied. He may have a union contract to that effect, and at the end of 4 years he can be hit for $291,000.

I think that is literally true. If you were an attorney and we passed this act, and you represented an employer of any kind, would you tell him that he was not under the act and that he had better try to get under it?

You say there are 5,000,000 employees excluded.

Mr. WEISS. All he would have to do, Congressman, is to ask the Administrator whether he was or was not under the act. If the Administrator gave him a letter to that effect, he had absolute protection, and a man who is not intelligent enough to find out, or have his attorney find out, with all that money involved, it seems to me, is a pretty poor businessman.

Mr. WERDEL. Let us not determine who is a poor businessman here in Washington. Let us say he has asked you whether or not he is under the act, and you say he is. He goes to the attorney, thinking he is not, and the attorney says, "I don't think you are," that the Supreme Court will change the rules, and when the act was first passed they gave the man 120 days to get under the act; but now 3 years have gone by. "The Supreme Court may decide this thing against you. It will be retroactive for 4 years. You are going to be stuck for $291,000, and you had better pay off; make your deal and get out." Mr. McCOMB. I think you are asking us to do something which makes the law completely unworkable, if we were to do something to relieve that. You said that this man was going to ask the Administrator whether he is under the law, and the Administrator says he is. He says, "Well; all right."

The lawyer says, "No;" you are not," in his opinion.

So he says, "I will take a chance." Or he just does not do it. If he gets by and you were his competitor, would you not do the same thing?

Mr. WERDEL. I am not so sure I would.

Mr. McCOMB. You are asking if there is some way you can give him relief. You do not think you would want to give the man relief when you tell him he is subject to the law, and he goes ahead and violates it deliberately after he has been told?

Mr. WERDEL. In other words, you are saying he has to take the word of the man from Washington-the Administrator-before the court acts, and act on it?

Mr. McCOMв. Or bring it to court immediately. That is what the businessman would do, immediately.

Mr. WERDEL. That is the point I wanted to make. Then you are in effect telling me that, when we pass this act, we give the Secretary of Labor the power, under severe penalty for violation, to force every employer from an economic standpoint to get under the act.

Mr. MCCOMB. You have the same thing today except that you would give protection. What we are asking here is protection for the employer on the reverse of that. You say that the Secretary of Labor says to an employer who comes and asks him, "No; you are not subject to the act," and 4 years later it comes up before the courts, and the

courts decide he is. Because the Secretary of Labor under this law is given rule-making power, they will not collect for that 4 years.

It seems to me if you have that kind of a rule, you cannot turn around and say, when he tells you you are subject to the act, and you do not pay it, and when you are found later by the court to be subject to the act, that you are excused.

Let me ask you this question: If you were the Administrator-or, rather, put it this way: You are the manufacturer asking me, "am I under the act." You want me to answer you. I think it is my duty to answer. Well, then, I am going to answer you the best I can, honestly, and state "Yes, you are under the act." If you choose to ignore that, you are taking your chances that the court will agree with you.

We have just had a case of that kind involving a great deal of money, where we told the industry 3 years ago that they were subject to the act, and they ignored it, and then the court came along and said, "Yes; you are subject." All three courts.

Mr. WERDEL. We, as Congress, cannot destroy a contract right, and neither can we delegate power to the Secretary of Labor to destroy one. If we give a man retroactive rights 4 years from now on court decision that is the practical effect of it-to collect $291,000, the Secretary cannot make a rule and say the employees are not entitled to it, because the employer was honest about it. We do not think we could give you that rule if we wanted to. The point I am making is where men are bona fide in their mistakes, and where they are dealing with union men under union contracts, the statute of limitations of 4 years in these damage threats and double damages is entirely too long.

Mr. WEISS. Does not the Portal Act meet the problem in giving the the judge power to waive, if they think there is a good reason; that is, completely waive the liquidated damages. Then all his obligation would be is that he would have to pay what he would have had to pay in the first place.

Mr. WERDEL. If this act is passed, it changes that.

Mr. WEISS. I do not quite see that. This does not amend the Portal Act.

Mr. WERDEL. But it is a more recent act, and it is all set out in black and white.

Mr. WEISS. That certainly was not the intention.

Mr. WERDEL. I realize that these situations have arisen, and that the matter was not pressed when organization was growing, places where there was not any collective bargaining in organization, and that the prosecution under the act and the suits under the act were waived.

Do you have any knowledge of those things, where it was relieved that way-where the employer was released from liability because of agreeing to union organization?

Mr. McCOMB. You mean because he agrees to organize that he would get relief from this law?

Mr. WERDEL. No.

Mr. WEISS. From us?
Mr. WERDEL. Yes.

Mr. WEISS. Never.

Mr. McCомв. We take the position, as I have said before, that we do not believe that you should relieve a company just because it is organized.

Mr. WERDEL. I agree with you, because it is compounding a crime, and that in itself is a crime. But to my personal knowledge there are two such employers who were bona fide paying a wage, and not breaking it down to avoid the penalties, and they were on the hook for about $50,000 to $58,000. Two out of 50 employees wanted a union. The employer signed the contract against the will of the 48. That did not do the union any good. And this, I think-our penalty provision here our statute of limitations provisions-have to be given some attention, because it certainly is not helping organized labor to organize men that way.

Mr. WEISS. You are not suggesting the Division waived the penalty, but the union agreed not to press a suit for back wages?

Mr. WERDEL. That is what I am told.

Mr. WIESS. We want to make it clear, as far as our divisions go, there were certain accusations made against us last year, and we investigated every one, and I think we established to the satisfaction of the committee there was nothing that we did that was out of order.

Mr. WERDEL. It only takes an act like that for a man in a labor organization, and if he is forced into some union organization he does not want to be in, he may want some other, he may want in none; but certainly he is not going to help the cause of collective bargaining any because he has the right to stay out as well as go in.

There is just one other question I have at this time. As I jotted down in the remarks of the Secretary yesterday, he said that he felt— in being pressed by someone on one side or the other as to why he did not ask for the right to lower wages below 75 cents-that he did not think it was necessary, or would ever be necessary. An then he said that if, in his opinion, the time came when it was necessary, he would be the first to go before Congress and ask for it. I presume you agree with that?

Mr. McCOMB. I am frank to say that I recall the statement, and as I recall it, it seemed to me you stated it correctly.

We have said that this 75 cents is a brake. In the depression, when wages began to go down, people could not buy. The furniture man could not manufacture and sell his furniture. The furniture man was laid off. He could not buy meat. The meat man wanted a job. They went in and took lower and lower wages, and that was a great cause of depression.

I think the 75-cent wage is a brake. It is a sort of flag that says "Wait a minute", I have not the slightest idea but what Conress. would immediately, if you got into that situation, consider, and very quickly, lower the rate.

Mr. WERDEL. And if the Secretary convinced Congress of the fact, Congress could act, could it not?

Mr. McCOMB. I should assume so, certainly.

Mr. WERDEL. Let us take that condition. I in my lifetime can remember when eggs were 10 cents a dozen, before we had all this planning. I am inclined to think we might plan wrong and fail to go back there. Let us see. Let us say we do. Let us say the Secretary believes that the salaries are so high that people cannot be employed, so he comes in and asks for that price. Is he then going to oppose labor organizations who have contracts for more than 75 cents an hour?

Then there is the provision that nobody will be put in prison unless he has been convicted once before. How many criminal convictions have there been under the old act?

Mr. McCOMB. Well, we can give that to you. It is quite small.
Mr. WERDEL. Will you supply those figures?

Mr. WEISS. We have them here.

Mr. McCOMB. At the present time, our figure would run about 40 or 50, maybe.

Mr. WERDEL. If you supply them to me, I assume we can put them in the record-the number of convictions under the previous act, criminal convictions.

Mr. LESINSKI. It is so ordered.

(The information referred to is as follows:)

Fair Labor Standards Act enforcement through litigation, 1938-48

Mr. WERDEL. Under subparagraph (b) of section 16, the language

is

Any employer who violates

the word "willful" is left out

the provisions of section 6 or 7 of this act shall be liable to the employee or employees affected.

And then it goes on in substance that he will pay overtime or time and a half for hours over 40 hours a week, and then that difference would be doubled, and then a reasonable attorney's fee.

Mr. McCOMB. If the employees must sue; yes. If, on the other hand, he voluntarily pays out, he just pays his time and a half. In other words, he pays what the law requires him to pay in the first place.

Mr. WEISS. That is under a new proposal in this bill.

Mr. WERDEL. Yes; but under the old bill he had to pay the liquidated damages.

Mr. WEISS. Except the Portal Act made modifications in that. The judge could, under certain circumstances, reduce or eliminate the liquidated damages.

Mr. McCOMB. I do not know whether you want to pursue this, except I would like to make a statement, because it has not been questioned, and I think something should be said. That is the request here for the right of the Secretary to sue. We have had many employees ask us to sue. They are reluctant, as we all are, unless we are lawyers, to