ANNEX NO. 1 TO OEP ECONOMIC STABILIZATION CIRCULAR NO. 101

Opening remarks by Arnold R. Weber, Executive Director, Cost of Living Council at news conference August 28, 1971:

In the last 12 days, the Cost of Living Council has considered a large number of issues concerning the wage-price freeze. Decisions on these issues have been made in the spirit of the President's basic premise: That the inflation threatening the Nation's economic stability must be halted. As these decisions have been made, we have distributed them to the American public as quickly as possible, because we know that many critical decisions hang upon those actions.

Again today we are issuing a press release, Q & A No. 9, which addresses issues decided by the Council. One of those is the issue of seasonality, which I would like to discuss with you now.

Seasonality. As you know, the prices and wages associated with a large number of products and industries follow distinct seasonal patterns. This is the issue of seasonality and it is not only an important issue, but one that requires immediate action.

The key question is: Should prices and wages that follow a distinct seasonal pattern qualify for exemption under the wageprice freeze?

The answer is not simple. To qualify, prices and wages must show a distinct fluctuation at a specific, identifiable point in time. There must also be a documented and

established practice that has taken place in each of the past 3 years. Examples are Puerto Rican hotel rates at the beginning or end of the fall/winter season, auto dealers' selling prices at new-model-introduction time; and wage rates for seasonal agricultural workers.

The important thing here is that each seasonal price change must be tied to a specific date, e.g., the introduction of new car models, the end of a specific month as in the case of traditional August furniture sales, the onset of a specific holiday such as Labor Day, or the start of a particular harvest season. The price change may not take place earlier this year than in 1970, unless the date is tied to a specific event such as previously planned introduction of new models or new television programs.

If the price or wage change qualifies as seasonal by the criteria just stated, the seller is permitted a choice of base periods to use in determining his ceiling price or wage. He may use the statutory base period (30 days prior to August 14 or the most recent 30 days when sales were made) or he may use the same seasonal period for 1970 (from the date of the specific event through November 13).

His selling price is based, therefore, on the prices he realized on a substantial number of transactions during whichever of the alternative base periods he chooses to use.

The seller or employer must have adequate records available to demonstrate the existence of the traditional practice in 3 preceding years and the basis for calculat

ing his selling price for the 1970 period. New establishments or activities may determine their qualification from that generally prevailing for similar establishments or activities in the immediate area.

Industries that regularly introduce new models require special procedures; separate ceilings must be calculated for the 1971 models and the 1972 models (even if there is no difference in the posted prices of the two models). Taking automobiles, washing machines, or snowmobiles, for example, the ceiling for the 1971 models would continue to be based on the July 16-August 14, 1971, base period, while the ceiling for the 1972 models would, if the dealer chooses, be based on prices charged for the 1971 models when they were introduced during the comparable 1970 period.

ANNEX NO. 2 TO OEP ECONOMIC STABILIZATION CIRCULAR No. 101

Cost of Living Council today issued the following summary to decisions on wage and salary contracts in the field of education.

If a teacher (or other educational personnel) in a school system has either performed work prior to August 15 under a new contract calling for a wage increase or if the teacher was eligible to have earned a salary at the new rate prior to August 15 the new rate is permissible. To be eligible means that the teacher in fact accrued earnings (at the new rate) which covered a period prior to August 15, although he or she may not have actually performed any work during that period.

In many cases a contract may read that its effective date is July 15 or some other day prior to August 15. The effective date of the pay increase for purposes of the wage-price freeze for individual contracts is determined by the two criteria-when the work is performed or when the individual is eligible to receive the new increase. Eligibility is proven by the period covered by and indicated on the paycheck (which may be issued after August 15). As an example, if a college has five cafeterias, three of which close down for the summer, and if the cafeteria workers are employed under a wage scale and under individual contracts keyed to those scales, the increase applies only to the summer employee who performed work prior to August 15. Those returning in September who have not performed work under the new contract do not receive the increase. If, however, there was one uniform system contract for all, then those cafeteria workers returning in the fall also receive the increase.

The question has arisen as to whether this applies to cafeteria workers and others. Where there is a system contract that meets the above criteria it applies. Otherwise the rule that applies is that before the increase is granted work must be performed under the new individual contract or the individual must have been eligible to accrue pay during a period prior to August 15.

A distinction is drawn between a system's contract negotiated for all teachers, or for other personnel, and a pay schedule on which individual contracts are based. Under the former, all teachers are eligible for increases if one teacher has performed under the contract prior to August 15 or was eligible to earn under it; under the uniform pay schedule each individual is dealt with individually: If he or she has performed work under a contract prior to August 15 or has been eligible to earn the new increase prior to that date the increase is allowed.

Another question involves multiyear contracts calling for annual increases on a date after the August 15 freeze. The increase may not go into effect.

What about longevity increases due after August 15? The longevity increase is frozen even though the pay raise is approved under conditions described here.

Does a teacher who has completed courses and received additional degrees making her eligible for the higher pay rate get a new salary level? Yes. This is a promotion, not a pay raise.

Can a newly hired teacher whose contract is signed after the freeze date collect the higher pay in a school system where all the wages are frozen under these rulings? No.

The question has been asked as to how this applies to college teachers. Where there is a system contract uniformly applying to college teachers in a college or university system, the same rule applies-if work was performed by any one faculty member under the new contract prior to August 15, or if any faculty member accrued the new salary prior to that date even if no work was performed, all faculty members affected by the contract are eligible for the increase. Where there are individual contracts, the two criteria of work performed or eligibility for accruing salary apply.

It is apparent that variations in contracts will continue to raise questions. School related organizations needing further information for their particular situations should wire Teacher Information at one of the 10 OEP regional centers, and state their specific questions or problems. A response will be made as soon as possible. Only requests from school related organizations will be honored. [36 F.R. 18739, Sept. 21, 1971]

ECONOMIC STABILIZATION CIRCULAR NO. 102

100. Purpose. (1) On August 15, 1971, President Nixon issued Executive Order No. 11615, as amended, providing for stabilization of prices, rents, wages, and salaries and establishing the Cost of Living Council, a Federal agency. The order delegated to the Council all of the powers conferred on the President by the Economic Stabilization Act of 1970, as amended. The effective date of the order was 12:01 a.m., August 16, 1971.

(2) By its Order No. 1 the Council delegated to the Director of the Office of Emergency Preparedness authority to administer the program for the stabilization of prices, rents, wages, and salaries as directed by section 1 of Executive Order No. 11615, as amended.

(3) Executive Order No. 11627 was issued on October 15, 1971, to further implement the President's stabilization program. The Order superseded Executive Order No. 11615 of August 14, 1971, but provided in section 13 that all orders, regulations, circulars, or other directives issued and all other actions taken pursuant to Executive Order No. 11615, as amended, are hereby confirmed and ratified, and shall remain in full force and effect, as if issued under this Order, unless and until altered, amended, or revoked by the Council or by such competent authority as the Council may specify.

(4) The purpose of this compilation, the second in a series to be issued, is to consolidate in one document all of the determinations issued by the Cost of Living Council incorporated in economic stabilization circulars previously published in the FEDERAL REGISTER from September 11 through October 15, 1971. This document is, in effect, a summarization and reclassification of such determinations.

(5) The second paragraph of Economic Stabilization Circular No. 101, section 100 (3) is amended to read as follows:

"To the extent that any provision of this circular may be inconsistent with the provisions of OEP Economic Stabilization Circulars 11, 12, 13, or 14, the provisions of Circulars 11, 12, 13, or 14 control. To the extent that any provision of this circular may be inconsistent with the provisions of OEP economic stabilization circulars issued or published after the date of this circular, the provisions of the most recently issued or published circular control."

(6) To the extent that any provision of this circular may be inconsistent with the provisions of any OEP economic stabilization circular issued or published subsequently to Economic Stabilization Circular No. 20, the provisions of such subsequently issued or published circular shall control.

200. Authority. (1) Relevant legal authority for the program includes the following:

The Constitution.

Economic Stabilization Act of 1970, Public Law 91-379, 84 Stat. 799; Public Law 92-15, 85 Stat. 38.

Executive Order No. 11615, as amended, 36 F.R. 15127, August 17, 1971.

Cost of Living Council Order No. 1, 36 F.R. 16215, August 20, 1971.

OEP Economic Stabilization Regulation No. 1, as amended, 36 F.R. 16515, August 21, 1971.

Executive Order No. 11627, 36 F.R. 20139, October 15, 1971.

300. General guidelines. (1) The guidance in this circular is in the nature of a compilation or consolidation of that previously offered in Economic Stabilization Circulars Nos. 11 through 20.

(2) The numbering system used in this circular corresponds to that used in OEP Economic Stabilization Circular No. 101.

(3) There is being published concurrently herewith as a part hereof a consolidated index to both previously published Economic Stabilization Circular No. 101 and to the subject Economic Stabilization Circular No. 102.

301. Base period. (1) The Economic Stabilization Act of 1970 states that "The President is authorized to issue such orders and regulations as he may deem appropriate to stabilize prices, rents, wages, and salaries at levels not less than those prevailing on May 25, 1970."

The level of prices, rents, wages, and salaries prevailing on May 25, 1970, is determined as follows: (a) The average (mean) price at which transactions were made on that day (as borne out by appropriate records); (b) if no actual transactions took place on that day, then the average (mean) price at which transactions took place on the nearest day prior to May 25, 1970, may be taken as the "prevailing" level for May 25, 1970; and (c) ceiling prices for products, services, and jobs not in existence on May 25, 1970, can only be calculated using the base period described by Executive Order 11615 and subsequent guidelines issued by the Cost of Living Council.

(2) Determination of 30-day base period: As used in OEP Economic Stabilization Regulation No. 1, the term "base period" for any commodity, service, rent, salary, or wage includes the period from July 16, 1971, through August 14, 1971. In cases where no transactions occurred in this 30-day base period, the base period will be the nearest preceding 30-day period in which a transaction did occur. "Thirty-day period" is defined as a 30

day block of time prior to July 16. Hence, moving back from July 16, the nearest preceding 30-day period would be June 16-July 15 and preceding that, May 17June 15, and so on.

302. Transactions. (1) In applying the substantial transactions test to determine the ceiling price that a businessman can charge his customers in the United States, he may not include prices on goods he exported during the base period.

(2) A manufacturer of holiday specialty items received and accepted firm orders during the base period. Items shipped during the freeze period cannot be based on the price at which he accepted these orders. By definition, a transaction occurs when goods are shipped. The ceiling price is the price at which a substantial volume of goods were shipped during the base period. In the case of the holiday items, the base period would be the nearest 30-day period in which transactions occurred.

(3) Intracorporate transaction prices are not frozen. However, the ceiling price for any external transaction must be calculated solely on the basis of extracorporate transactions during the base period.

(4) The price at which an order was taken and secured by a deposit prior to August 15 does not constitute a transaction price for purposes of establishing the seller's ceiling price. There must be shipment of the merchandise to constitute a transaction.

(5) When a service contract involves either performance in several stages (some of which may be preparatory to performing the final service), performance of a continuous nature, or performance periodically, a transaction is considered to have taken place when the buyer actually receives the first unit of final service called for under the contract. Work in progress preparatory to provision of the final service does not qualify as a transaction.

(6) Many industries, such as liquor, public utilities, and transportation, are required by State laws to publish proposed price or rate changes for a period of time prior to the date on which the changes are to become effective. Where such a legal requirement for posting of prices prior to implementation has resulted in price increases becoming effective during the freeze, the transactions rule may not be modified to permit these price increases to stand. The ceiling

prices during the freeze are the highest prices charged in a substantial number of transactions in the base period.

303. Seasonal patterns. (1) A processor of agricultural products who, because of seasonal operations made no new sales in the base period, except forward sales, cannot sell at prices which prevailed in his marketing area for similar products in the 30 days ending August 14. Such processors are frozen at their price in either the 30-day period prior to August 15, or the price of their substantial deliveries during the last 30 days of operation in the previous season, or the seasonal price ceiling if the seller meets the criteria of the seasonality rule, or the May 25, 1970, date ceiling.

(2) Candy manufacturers who make specialized holiday candies for occasions such as Halloween, Thanksgiving, and Christmas must use the prices of the last shipments of such candies-probably those made last year prior to the special event involved-to establish their ceiling prices. They may not base their ceiling price or rates on similar candies with different shapes during this year's prefreeze base period.

If manufacturers develop new compositions or shapes, then pricing must be computed on the basis of comparable products in the base period.

However, if changes are made only in the color, size, or shape of the container or only in the color of the candy, manufacturers may compute their prices using either the prefreeze base period, or, if the seasonality rule applies, last year's prices.

304. Medicare. (1) All medical fees for individual services, including those covered by Medicare, are frozen.

Medicare is an insurance program. Thus Medicare payments to physicians, hospitals, and others providing medical services are not prices but are, like other insurance settlements, reimbursements not subject to the freeze.

305. Medicaid. (1) Medicaid is a public assistance program and, accordingly, Medicaid payments are not frozen. However, payment schedules established during the base period for medical services provided under the Medicaid program are considered to be prices and are frozen. In effect, then, the Medicaid reimbursements (per unit of service) based on these payment schedules are frozen.

400. Price guidelines.

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