"Produced" means produced, manufactured, mined, handled or in any other manner worked on in any State; and for the purposes of this act an employee shall be deemed to have been engaged in the production of goods if such employee was employed in producing, manufacturing, mining, handling transporting, or in any other manner working on such goods, or in any closely related process or occupation directly essential to the production thereof, in any State. The act bars from interstate commerce "any" goods in the production of which "any" employee was employed in violation of the minimum-wage or overtimepay provisions," and provides that in determining, for purposes of this provision,

$1 These elements need not be considered if the employee would be covered in any event because engaged "in commerce" under the principles discussed in preceding sections of this part.

52 Act, sec. 3 (1). This definition is also applicable in determining coverage of the child labor provisions of the act. See Part 4 of this title.

53 Act, sec. 15 (a) (1). The only exceptions are stated in the section itself, which provides that "it shall be unlawful for any person (1) to transport, offer for transportation, ship, deliver, or sell in commerce, or to ship, deliver, or sell with knowledge that shipment or delivery or sale thereof in commerce is intended, any goods in the production of which any employee was employed in violation of section 6 or section 7, or in violation of any regulation or order of the Administrator issued under section 14; except that no provision of this Act shall impose any liability upon any common carrier for the transportation in commerce in the regular course of its business of any goods not produced by such common carrier, and no provision of this Act shall excuse any common carrier from its obligation to accept any goods for transportation; and except that any such transportation, offer, shipment, delivery, or sale of such goods by a purchaser who acquired them in good faith in reliance on written assurance from the producer that the goods were produced in compliance with the requirements of the Act, and who acquired such goods for value without notice of any such violation, shall not be deemed unlawful;"

whether an employee was employed in the production of such goods:

proof that any employee was employed in any place of employment where goods shipped or sold in commerce were produced, within ninety days prior to the removal of the goods from such place of employment, shall be prima facie evidence that such employee was engaged in the production of such goods."

(b) General scope of "production" coverage. The statutory provisions quoted in paragraph (a) of this section, show that for purposes of the act, wherever goods are being produced for interstate or foreign commerce, the employees who are covered as “engaged in the production" of such goods, include, in general, all those whose work may fairly be said to be a part of their employer's production of such goods," and include those whose work is closely related and directly essential thereto," whether employed by the same or a different employer. (See §§ 776.17 to 776.19.) Typically, but not exclusively, this includes that large group of employees engaged in mines, oil fields, quarries, and manufacturing, processing, or distributing plants where goods are produced for commerce. The employees covered as engaged in "production" are not limited, however, to those engaged in actual physical work on the product itself or to those in the factories, mines, warehouses, or other places of employment where goods intended for commerce are being produced. If the requisite relationship to production of such goods is present, an employee is covered, regardless of whether his work brings him into actual contact with such goods or into the establishments where they are produced, and even though his employer may be someone other than the producer of the goods for commerce." As explained more fully in the sections following, the act's "production" coverage embraces many employees who serve productive enterprises in capacities

Act, sec. 15 (b).

55 Borden Co. v. Borella, 325 U. S. 679; Armour & Co. v. Wantock, 323 U. S. 126. See also paragraph (c) of this section.

56 Kirschbaum v. Walling, 316 U. S. 517; Roland Electrical Co. v. Walling, 826 U. S. 657; H. Mgrs. St., 1949, p. 14; Sen. St. 1949 Cong. Rec., p. 15372.

51 Borden Co. v. Borella, 325 U. S. 679; Roland Electrical Co. v. Walling, 326 U. S. 657; Kirschbaum v. Walling, 316 U. S. 517; Walton v. Southern Package Corp., 320 U. S. 540.

which do not involve working directly on goods produced but which are nevertheless closely related and directly essential to successful operations in producing goods for interstate or foreign

commerce.

And as a general rule, in conformity with the provisions of the act quoted in paragraph (a) of this section, an employee will be considered to be within the general coverage of the wage and hours provisions if he is working in a place of employment where goods sold or shipped in interstate commerce or foreign commerce are being produced, unless the employer maintains the burden of establishing that the employee's functions are so definitely segregated from such production that they should not be regarded as closely related and directly essential thereto."

§ 776.16 Employment in "producing, * or in any other manner working on" goods.

(a) Coverage in general. Employees employed in "producing, manufacturing, mining, handling, or in any other manner working on" goods (as defined in the act, including parts or ingredients thereof) for interstate or foreign commerce are considered actually engaged in the "production" of such goods, within the meaning of the act. Such employees have been within the general coverage of the wage and hours provisions since enactment of the act in 1938, and remain so under the Fair Labor Standards Amendments of 1949.50

actual

(b) Activities constituting "production” under statutory definition. It will be noted that the actual productive work described in this portion of the definition of “produced" includes not only the work involved in making the products of mining, manufacturing, or processing operations, but also includes "handling, transporting, or in any other manner working on" goods. This is so, regardless of whether the goods are to be further processed or are so-called "finished goods." The Supreme Court has stated that this language of the definition brings within the scope of the term "production," as used in the act, "every step in putting the subject to commerce in a state to enter commerce," including

Guess v. Montague, 140 F. 2d 500 (C. A. 4). Cf. Armour & Co. v. Wantock, 323 U. S. 126.

"H. Mgrs. St., 1949, p. 14; Sen St., 1949 Cong. Rec. p. 15372.

However, where employees of a common carrier, by handling or working on goods, accomplish the interstate transit or movement in commerce itself, such handling or working on the goods is not "production." The employees in that event are covered only under the phrase "engaged in commerce." "1

(c) Physical labor. It is clear from the principles stated in paragraphs (a) and (b) of this section, that employees in shipping rooms, warehouses, distribution yards, grain elevators, etc., who sort, screen, grade, store, pack, label, address or otherwise handle or work on goods in preparation for shipment of the goods out of the State are engaged in the production of goods for commerce within the meaning of the act." The same has been held to be true of employees doing such work as handling ingredients (scrap iron) of steel used in building ships which will move in commerce;" handling and caring for livestock at stockyards where the livestock are destined for interstate shipment as such " or as meat prod

"Western Union Tel. Co. v. Lenroot, 323 U. S. 490. See, to the same effect, Walling v. Friend, 156 F. 2d 429 (C. A. 8); Walling v. Comet Carriers, 151 F. 2d 107 (C. A. 2); Phillips v. Star Overall Dry Cleaning Laundry Co., 149 F. 2d 416 (C. A. 2); certiorari denied 327 U. S. 780; Walling v. Griffin Cartage Co., 62 F. Supp. 396, affirmed in 153 F. 2d 587 (C. A. 6). For examples, see paragraphs (c) and (d) of this section. Employees who are not engaged in the actual production activities described in section 3 (1) of the act are not engaged in "production" unless their work is "closely related" and "directly essential" to such production. See §§ 776.17-776.19.

61 Western Union Tel. Co. v. Lenroot, 323 U. S. 490. For examples, see paragraph (c) of this section.

"McComb v. Wyandotte Furn. Co., 169 F. 2d 766 (C. A. 8); Walling v. Mutual Wholesale Food & Supply Co., 141 F. 2d 331 (C. A. 8); West Kentucky Coal Co. v. Walling, 153 F.2d 582 (C. A. 6); Walling v. Home Loose Leaf Tobacco Warehouse Co., 51 F. Supp. 914 (E. D. Ky.); Walling v. Yeakley, 3 W. H. Cases 27, modified and affirmed in 140 F. 2d 830 (C. A. 10); Shain v. Armour & Co., 50 F. Supp. 907 (W. D. Ky.); Walling v. McCracken County Peach Growers Assn., 50 F. Supp. 900 (W. D. Ky). See also Clyde v. Broderick, 144 F. 2d 348 (C. A. 10).

" Bracey v. Luray, 188 F. 2d 8 (C. A. 4). Walling v. Friend, 156 F. 2d 429 (C. A. 8).

67

ucts; handling or transporting containers to be used in shipping products interstate; transporting, within a single State, oil to a refinery or lumber to a mill," where products of the refinery or mill will be sent out of the State; transporting parts or ingredients of other types of goods or the finished goods themselves between processors, manufacturers, and storage places located in a single State, where goods so transported will leave the State in the same or an altered form; " and repairing or otherwise working on ships," vehicles," machinery," clothing," or other goods which may be expected to move in interstate commerce.

These examples are, of course, illustrative rather than exhaustive. Some of them relate to situations in which the handling or working on goods for interstate or foreign commerce may constitute not only "production for commerce" but also engaging “in commerce" because the activities are so closely related to commerce as to be for all practical purposes a part of it." However, as noted in paragraph (b) of this section, handling or working on goods constitutes engagement in "commerce" only and not en

65 Fleming v. Swift & Co., 41 F. Supp. 825, affirmed in 131 F. 2d 249 (C. A. 7); McComb v. Benz Co., 9 W. H. Cases 277 (8. D. Ind.). Walling v. Villaume Box & Lbr. Co., 58 F. Supp. 150 (D. Minn.).

7 Mid-Continent Pipe Line Co. v. Hargrave, 129 F.2d 655 (C. A. 10); Boling v. R. J. Allison Co., Inc., 4 W. H. Cases 500 (N. D. Okla.). "Hanson v. Lagerstrom, 133 F. 2d 120 (C. A. 8).

Walling v. Griffin Cartage Co., 62 F. Supp. 696, affirmed in 153 F. 2d 587 (C. A. 6); Walling v. Comet Carriers, 151 F. 2d 107 (C. A. 2).

10 Slover v. Wathen, 140 F. 2d 258 (C. A. 4). Hertz Drivurself Stations v. United States, 150 F.2d 923 (C. A. 8); Walling v. Armbruster, 51 F. Supp. 166 (W. D. Ark.); McComb v. Weller, 9 W. H. Cases 53 (W. D. Tenn.), 17 Labor Cases (CCH) par. 65, 332; Walling v. Strum & Sons, 6 W. H. Cases 131 (D. N. J.), 11 Labor Cases (CCH) par. 63, 249.

"Engebretson v. Albrecht, 150 F. 2d 602 (C. A. 7); Guess v. Montague, 140 F. 2d 500 (C. A. 4).

Ta Walling v. Belikoff, 147 F. 2d 1008 (C. A. 2); Campbell v. Zavelo, 243 Ala. 361, 10 So. 2d 29; Phillips v. Star Overall Dry Cleaning Laundry Co., 149 F. 2d 416 (C. A. 2), certiorari denied 327 U. S. 780.

14 Slover v. Wathen, 140 F. 2d 258 (C. A. 4); Hertz Drivurself Stations v. United States, 150 F. 2d 923 (C. A. 8); Engebretson v. Albrecht, 150 F. 2d 602 (C. A. 7); Walling v. Sturm & Sons, 6 W. H. Cases 131 (D. N. J.).

gagement in "production" of the goods when it is done by employees of a common carrier and is itself the means whereby interstate transit or movement of the goods by the carrier is accomplished. Thus, employees of a telegraph company preparing messages for interstate transmission, television cameramen photographing sports or news events for simultaneous viewing at television receiving sets in other States, and railroad train crews or truck drivers hauling goods from one State to another are not engaged in the "production" of goods by virtue of such activities, but are covered by the act only as employees "engaged in commerce."

(d) Nonmanual work. The "production" described by the phrase "producing or in any other manner working on" goods includes not only the manual, physical labor involved in processing and working on the tangible products of a producing enterprise, but equally the administration, planning, management, and control of the various physical processes together with the accompanying accounting and clerical activities." An enterprise producing goods for commerce does not accomplish the actual production of such goods solely with employees performing physical labor on them. Other employees may be equally important in actually producing the goods, such as employees who conceive and direct policies of the enterprise; employees who dictate, control, and coordinate the steps involved in the physical production of goods; employees who maintain detailed and meticulous supervision of productive activities; and employees who direct the purchase of raw materials and supplies, the methods of production, the amounts to be produced, the quantity and character of the labor, the safety measures, the budgeting and financing, the labor policies, and the maintenance of the plants and equipment. (For regulations governing exemption from the wage and hours provisions of employees employed in a bona fide executive, administrative, or professional capacity, see Part 541 of this chapter.) Employees who perform these and similar activities are an integral part of the coordinated productive pattern of a modern industrial organization. The

"Borden Co. v. Borella, 325 U. S. 679; Herta Drivurself Stations v. United States, 150 F.2d 923 (C. A. 8); Callus v. 10 E. 40th St. Bldg., 146 F. 2d 488 (C. A. 2), reversed on other grounds in 325 U. S. 578.

Supreme Court of the United States has held that from a productive standpoint and for purposes of the act the employees who perform such activities "are actually engaged in the production of goods for commerce just as much as are those who process and work on the tangible products" in the manufacturing plants or other producing facilities of the enterprise."

§ 776.17 Employment in a "closely related process or occupation directly essential to" production of goods.

(a) Coverage in general. Employees who are not actually "producing or in any other manner working on" goods for commerce are, nevertheless, engaged in the "production" of such goods within the meaning of the act and therefore within its general coverage if they are employed "in any closely related process or occupation directly essential to the production thereof, in any State."" ."" Prior to the Fair Labor Standards Amendments of 1949, this was true of employees engaged “in any process or occupation necessary to the production" of goods for commerce. The amendments deleted the word "necessary" and substituted the words "closely related" and "directly essential" contained in the present law. The words "directly essential" were adopted by the Conference Committee in lieu of the word "indispensable" contained in the amendments as first passed by the House of Representatives. Under the amended language, an employee is covered if the process or occupation in which he is employed is both "closely related" and "directly essential" to the production of goods for interstate or foreign commerce.

The legislative history shows that the new language in the final clause of section 3 (j) of the act is intended to narrow, and to provide a more precise guide to, the scope of its coverage with respect to employees (engaged neither "in commerce" nor in actually "producing or in any other manner working on" goods for commerce) whose coverage under the act formerly depended on whether their

Borden Co. v. Borella, 325 U. S. 679, 683. "If coverage of an employee is determined to exist on either basis, it is, of course, not necessary to determine whether the employee would also be covered on the other ground. See Warren-Bradshaw Drilling Co. v. Hall, 124 F. 2d 42 (C. A. 5), affirmed in 317 U. S. 88.

work was "necessary" to the production of goods for commerce. Some employees whose work might meet the "necessary" test are now outside the coverage of the act because their work is not "closely related" and "directly essential" to such production; others, however, who would have been excluded if the indispensability of their work to production had been made the test, remain within the coverage under the new language."

78

The scope of coverage under the "closely related" and "directly essential” language is discussed in the paragraphs following. In the light of explanations provided by managers of the legislation in Congress including expressions of their intention to leave undisturbed the areas of coverage established under court decisions containing similar language," this new language should provide a more definite guide to the intended coverage under the final clause of section 3 (j) than did the earlier "necessary" test. However, while the coverage or noncoverage of many employees may be determined with reasonable certainty, no precise line for inclusion or exclusion may be drawn; there are bound to be borderline problems of coverage under the new language which cannot be finally determined except by authoritative decisions of the courts.

(b) Meaning of "closely related" and "directly essential". The terms "closely related" and "directly essential" are not susceptible of precise definition; as used in the act they together describe a situation in which, under all the facts and circumstances, the process or occupation in which the employee is employed bears a relationship to the production of goods for interstate or foreign commerce (1) which may reasonably be considered close, as distinguished from remote or tenuous, and (2) in which the work of the employee directly aids production in a practical sense by providing

"H. Mgrs. St., 1949, p. 14; Sen. St., 1949 Cong. Rec. p. 15372; Statement of the Chairman of the Committee on Education and Labor explaining the conference agreement to the House of Representatives, 1949 Cong. Rec., p. 15135; colloquy between Representatives McConnell and Javits, 1949 Cong. Rec., p. 15129; cf. statements of Representative Barden (1949 Cong. Rec. p. 15131), Representative Brehm (1949 Cong. Rec., p. 15132), and Senator Taft (1950 Cong. Rec., p. A-1162).

7 See Kirschbaum Co. v. Walling, 316 U. S.

517.

something essential to the carrying on in an effective, efficient, and satisfactory manner of an employer's operations in producing such goods."

Not all activities that are "closely related" to production will be "directly essential" to it, nor will all activities 'directly essential" to production meet the "closely related" test. For example, employees employed by an employer in an enterprise, or portion thereof, which is devoted to the production of goods for interstate or foreign commerce will, as a general rule, be considered engaged in work "closely related" to such production, but some such employees may be outside the coverage of the act because their work is not "directly essential" to production of the goods. (For a discussion of this point and specific illustrations, see § 776.18 (b).) Similarly, there are some situations in which an employee performing work "directly essential" to production by an employer other than his own may not be covered because the kind of work and the circumstances under which it is performed show the employee's activities to be so much a part of an essentially local business operated by his employer that it would be unrealistic to consider them "closely related" to the productive activities of another. (For a more detailed discussion and specific illustrations, see § 776.19.)

(c) Determining whether activities are "closely related” and “directly essential”. (1) The close relationship of an activity to production, which may be tested by a wide variety of relevant factors, is to be distinguished from its direct essentiality to production, which is dependent solely on considerations of need or function of the activity in the productive enterprise. The words "directly essential" refer only to the relationship of the employee's work to production. Work "directly essential" to production remains so no matter whose employee does it and regardless of the nature or purpose of the employer's business. It seems clear, on the other hand, that the criteria for determining whether a process or occupation is "closely related" to production cannot be limited to those which show its closeness in terms of need or function." It may also be important to ascer

* See H. Mgrs. St., 1949, pp. 14. 15; Sen. St., 1949 Cong. Rec., p. 15372; cf. Kirschbaum Co. v. Walling. 316 U. 8. 517.

Of course, if the need or function of the activity in production is such that the tie between them is both close and immediate

tain, for instance, whether the activity of the employee bears a relationship to production which is close in terms either of the place or the time of its performance, or in terms of the purposes with which the activity is performed by the particular employer through the employee, or in terms of relative directness or indirectness of the activity's effect in relation to such production, or in terms of employment within or outside the productive enterprise. (Examples of the application of these principles may be found in §§ 776.18 and 776.19.)

(2) The determination of whether an activity is closely or only remotely related to production may thus involve consideration of such factors, among others, as the contribution which the activity makes to the production; who performs the activity; where, when and how it is performed in relation to the production to which it pertains; whether its performance is with a view to aiding production or for some different purpose; how immediate or delayed its effect on production is; the number and nature of any intervening operations or processes between the activity and the production in question; and, in an appropriate case, the characteristics and purposes of the employer's business." Moreover, in some cases where particular work "directly essential" to production is performed by an employer other than the producer, the degree of such essentiality may be a significant factor in determining whether the work is also "closely related" to such production. (See § 776.19.)

No one of the factors listed in this subparagraph is necessarily controlling, and other factors may assume importance. Some may have more significance than others in particular cases, depending upon the facts. They are merely useful guides for determining whether the total situation in respect to a particular process or occupation demonstrates the

(cf. Kirschbaum Co. v. Walling, 316 U. S. 517). as for example, where an employee is employed to repair electric motors which are used in factories in the production of goods for commerce, this fact may be sufficient to show both the direct essentiality and the close relationship of the employee's work to production. See Roland Electrical Co. v. Walling, 326 U. S. 657. See also § 776.19 and H. Mgrs. St.. 1949. pp. 14. 15.

Cf. Kirschbaum Co. v. Walling, 316 U. 8. 517; 10 E. 40th St. Bldg. v. Callus, 325 U. 8. 578; Schulte Co. v. Gangi, 328 U. S. 108; Borden Co. v. Borella, 325 U. S. 679; Armour Co. v. Wantock, 323 U. S. 126.