Opinion
Record No. 2506.
April 13, 1942.
Present, All the Justices.
1. MASTER AND SERVANT — Fair Labor Standards Act — Action for Overtime Compensation, Liquidated Damages and Attorney's Fee Not One to Enforce a Penalty. — An action under the Fair Labor Standards Act, 29 U.S.C.A. secs. 201, et seq., for overtime compensation, liquidated damages, and a reasonable attorney's fee is not one to enforce a penalty under section 256 of the Judicial Code, 28 U.S.C.A. sec. 371.
2. MASTER AND SERVANT — Fair Labor Standards Act — Action for Overtime Compensation — Jurisdiction Conferred upon Both State and Federal Courts — Case at Bar. — In the instant case, an action for overtime compensation, liquidated damages and a reasonable attorney's fee under the Fair Labor Standards Act, 29 U.S.C.A. secs. 201, et seq., plaintiff obtained a judgment on a warrant before the civil justice of the city of Norfolk, and the employer contended that jurisdiction was vested exclusively in the courts of the United States under section 256 of the Judicial Code, 28 U.S.C.A. sec. 371. Under section 16(b) of the Act, 29 U.S.C.A., sec. 216(b), the action "may be maintained in any court of competent jurisdiction."
Held: That there was no merit in the contention of the employer since Congress intended to confer jurisdiction upon both State and Federal courts.
3. MASTER AND SERVANT — Fair Labor Standards Act — Right to Overtime Compensation — Not Defeated by Agreement to Work for Stipulated Sum Regardless of Hours Employed — Case at Bar. — The instant case was an action to recover overtime compensation, liquidated damages and a reasonable attorney's fee under the Fair Labor Standards Act, 29 U.S.C.A. secs. 201, et seq. Defendant employer admitted that plaintiff averaged fifty-one hours a week employment for each full-time week during the time he was with the company. The maximum permitted by section 7(a)(1) of the Act, 29 U.S.C.A. sec. 207(a)(1), without overtime compensation was forty-four hours per week, but defendant claimed that he owed plaintiff nothing for overtime because, shortly before the effective date of the Act, plaintiff agreed to work for a guaranteed total of thirty-five dollars per week, including both straight time and overtime, regardless of the number of hours he was employed. Defendant requested the court to instruct the jury that if such an agreement was made between the parties the verdict should be for defendant. This instruction was refused.
Held: No error.
4. MASTER AND SERVANT — Fair Labor Standards Act — Purpose of Section 7 Is to Regulate Maximum Hours — Promoted by Requiring Payment of Higher Rate for Overtime. — The purpose of section 7 of the Fair Labor Standards Act, 29 U.S.C.A. sec. 207, prescribing the maximum hours of employment and providing for overtime payments for hours worked in excess thereof, is to regulate the maximum number of hours which an employee may be required to work, and the purpose is induced or promoted by requiring the employer to pay a higher rate for the overtime in excess of the statutory maximum number of hours than is paid for straight time according to the regular rate.
5. MASTER AND SERVANT — Fair Labor Standards Act — Computation of Overtime Compensation — "Regular Rate" Not Synonymous with Minimum Rate Schedule — Overtime Incurred though Minimum Rate Paid. — The "regular rate" at which overtime compensation of an employee is computed under section 7 of the Fair Labor Standards Act, 29 U.S.C.A. sec. 207, is not synonymous with the minimum wage schedule prescribed in section 6, 29 U.S.C.A. sec. 206, and the mere fact that an employee is paid the minimum wage prescribed in the latter section does not relieve the employer from the penalty of overtime payments where the hours of the workweek exceed the maximum prescribed in section 7. Overtime is incurred when the maximum number of hours is exceeded, even though the employee is entitled under his contract of employment to substantially more than the minimum wages set by section 6.
6. MASTER AND SERVANT — Fair Labor Standards Act — Right to Overtime Compensation — Not Precluded by Agreed Rate of Pay Not Representing True Rate. — The fact that employer and employee agree to a rate of pay which does not represent that at which the employee is really employed cannot preclude the operation of section 7 of the Fair Labor Standards Act, 29 U.S.C.A. sec. 207, requiring overtime payments, for private agreements which are inconsistent with wage and hour statutes must yield to the broader public policy declared in those acts.
7. MASTER AND SERVANT — Fair Labor Standards Act — Computation of Overtime Compensation — "Regular Rate" Arrived at by Dividing Weekly Salary by Number of Hours Worked — Case at Bar. — The instant case was an action to recover overtime compensation, liquidated damages and a reasonable attorney's fee under the Fair Labor Standards Act, 29 U.S.C.A. secs. 201, et seq. The defendant employer admitted that the plaintiff averaged fifty-one hours a week employment for each full-time week during the time he was with the company. The maximum permitted by section 7(a)(1) of the Act, 29 U.S.C.A. sec. 207(a)(1), without overtime compensation was forty-four hours per week. The court instructed the jury on the theory that computation of the regular rate of pay, upon which the overtime rate was based, should be arrived at by dividing the weekly wage of thirty-five dollars by the statutory maximum of forty-four hours which would result in a straight time rate of seventy-five cents per hour and a time and one-half rate of one dollar and eighteen cents per hour. The Administrator's "Interpretative Bulletin No. 4" states if the employee is on a weekly salary basis, his regular hourly rate of pay, on which time and a half must be paid, is computed by dividing the salary by the regular number of hours worked, or if no regular number of hours is worked, by the total number of hours worked each week.
Held: That the instruction was erroneous since, applying the Administrator's method of computation, the weekly salary of thirty-five dollars should have been divided by the fifty-one hours which would entitle the employee to sixty-eight and six-tenths cents as the regular rate at which he was employed for forty-four hours and which would entitle him to overtime for seven hours per week at the rate of one dollar and three cents per hour.
8. MASTER AND SERVANT — Fair Labor Standards Act — Action for Overtime Compensation — Admissibility of Evidence that Defendant Had Been Enjoined from Violating Act — Case at Bar. — In the instant case, an action for unpaid overtime compensation under the Fair Labor Standards Act, 29 U.S.C.A. secs. 201, et seq., defendant assigned as error the act of the court in permitting plaintiff to show that in a suit brought by the Federal Administrator of the Wage and Hour Division against defendant it had been enjoined from violating the Act.
Held: That the evidence was prejudicial to defendant and was not admissible. Plaintiff was not a party in the former suit and hence the decree in that cause was not res judicata in the present action.
9. MASTER AND SERVANT — Fair Labor Standards Act — Action for Overtime Compensation — Admissibility of Evidence of Other Claims against Defendant — Case at Bar. — In the instant case, an action for unpaid overtime compensation under the Fair Labor Standards Act, 29 U.S.C.A. secs. 201, et seq., the court permitted the introduction of evidence that other employees of defendant company had made claims against it for overtime.
Held: That the evidence should have been excluded since it was irrelevant and likely to prejudice the minds of the jury.
Error to judgments of the Circuit Court of the city of Norfolk. Hon. Allan R. Hanckel, judge presiding.
Reversed and remanded.
The opinion states the case.
James G. Martin Son, for the plaintiff in error.
Ivor A. Page, Sr., Vivian L. Page and Walter A. Page, for the defendant in error.
This is an action at law brought by L. A. Wittkamp against his former employer, Tidewater Optical Company, Inc., under section 16(b) of the Fair Labor Standards Act of 1938 (Act of June 25, 1938, c. 676, 52 Stat. 1060, 29 U.S.C.A., secs. 201, et seq.), for "unpaid overtime compensation," "liquidated damages," and a "reasonable attorney's fee". The relevant provisions of the Act, which became effective on October 24, 1938, are found in the margin.
"MINIMUM WAGES
"Sec. 6. (a) Every employer shall pay to each of his employees who is engaged in commerce or in the production of goods for commerce wages at the following rates —
"(1). during the first year from the effective date of this section, not less than 25 cents an hour,
"(2) during the next six years from such date, not less than 30 cents an hour,
"(3) after the expiration of seven years from such date, not less than 40 cents an hour, or the rate (not less than 30 cents an hour) prescribed in the applicable order of the Administrator issued under section 8, whichever is lower, and
"(4) at any time after the effective date of this section, not less than the rate (not in excess of 40 cents an hour) prescribed in the applicable order of the Administrator issued under section 8.
"(5) * * * * * * * * * *
"(b) This section shall take effect upon the expiration of one hundred and twenty days from the date of enactment of this Act.
"(c) * * * * * * * * * *
"MAXIMUM HOURS
"Sec. 7 (a) No employer shall, except as otherwise provided in this section, employ any of his employees who is engaged in commerce or in the production of goods for commerce —
"(1) for a workweek longer than forty-four hours during the first year from the effective date of this section,
"(2) for a workweek longer than forty-two hours during the second year from such date, or
"(3) for a workweek longer than forty hours after the expiration of the second year from such date, unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regulars rate at which, he is employed.
"(b) * * * * * * * * * *
"(c) * * * * * * * * * *
"(d) This section shall take effect upon the expiration of one hundred and twenty days from the date of enactment of this Act.
"PENALTIES
"Sec. 16(a) * * * * * * * * *
"(b) Any employer who violates the provisions of section 6 or section 7 of this Act shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. Action to recover such liability may be maintained in any court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated, or such employee or employees may designate an agent or representative to maintain such action for and in behalf of all employees similarly situated. The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action."
The action originated in a warrant before the civil justice of the city of Norfolk where there was a judgment for the plaintiff. The defendant appealed to the Circuit Court of the city of Norfolk, and upon a trial before a jury there was a verdict of $426.58 for the plaintiff, upon which the trial court entered judgment, together with an attorney's fee of $50. The case is before us on a writ of error awarded the defendant employer and its surety.
The first contention of the employer is that this is a suit "for penalties and forfeitures incurred under the laws of the United States," the jurisdiction of which is vested exclusively in the courts of the United States under section 256 of the Judicial Code ( 28 U.S.C.A., sec. 371).
[1, 2] Although the Fair Labor Standards Act is of recent origin, the precise question has been frequently presented to the courts. These have been practically unanimous in holding that a suit of this character is not one to enforce a penalty within the meaning of section 256 of the Judicial Code ( 28 U.S.C.A., sec. 371), and that by providing that an action under section 16(b) of the Act ( 29 U.S.C.A., sec. 216(b) "may be maintained in any court of competent jurisdiction," Congress intended to confer jurisdiction upon both State and Federal courts. See Hart v. Gregory, 218 N.C. 184, 10 S.E.2d 644, 647, 130 A.L.R. 265; Forsyth v. Central Foundry Co., 240 Ala. 277, 198 So. 706, 709; Tapp v. Price-Bass Co., 177 Tenn. 189, 147 S.W.2d 107, 108; Stringer v. Griffin Grocery Co. (Tex.Civ.App.), 149 S.W.2d 158, 160; Adair v. Traco Division, 192 Ga. 59, 14 S.E.2d 466, 468; Floyd v. Du Bois Soap Co. (Ohio App.), 38 N.E.2d 919, 920.
Wittkamp was employed by the Tidewater Optical Company from September, 1938, until some time in April, 1939, as a "first-class optician". The company is engaged in the manufacture of lenses and eyeglasses, a substantial number of which are shipped in interstate commerce. It, therefore, admits that it is subject to the Fair Labor Standards Act.
Wittkamp was originally hired at a salary of $35 per week, and except for one or two weeks when he was not working full time, he was paid this amount for each week while with the company. According to his testimony, during each of the full-time weeks from November 5, 1938, to April 9, 1939, he worked longer than 44 hours per week, the maximum permitted under section 7(a)(1) of the Act ( 29 U.S.C.A., sec. 207(a)(1)). He further testified that the accumulated overtime during this period amounted to 203 hours.
While the company disputes the accuracy of these figures, it admits that Wittkamp averaged 51 hours a week for each full-time week during the same period.
However, it contends that it owes Wittkamp nothing for the overtime because, it says, shortly before the effective date of the Act he agreed to work for the guaranteed total of per week, including both straight time and overtime, regardless of the number of hours he was employed. Wittkamp denied that he made such an agreement.
The company requested the court to instruct the jury that if they believed from the evidence that such an agreement was made between the parties, the verdict should be for the defendant, — that is, that the employee was not entitled to recover overtime or liquidated damages under the statute. This instruction was refused, and properly so, we think.
Although the brief of the company contains neither argument nor authority in support of its position, apparently its contention is based upon the theory that section 7 of the Act ( 29 U.S.C.A., sec. 207) is satisfied by the payment of the minimum wages prescribed in section 6 ( 29 U.S.C.A., sec. 206), — that is, by the payment of wages equal to 25 cents for each hour of the statutory workweek of 44 hours, plus time and one-half (37 1/2 cents) for each additional hour of employment in any given week.
In a brief filed by counsel for the Administration of the Wage and Hour Division, United States Department of Labor, as amicus curiae, which is quite informative on the principle questions before us, it is demonstrated that while the purpose of section 6 of the Act ( 29 U.S.C.A., sec. 206) is to establish minimum wages, the purpose of section 7 ( 29 U.S.C.A., sec. 207) is to regulate the maximum number of hours which an employee may be required to work, and that the latter purpose is induced or promoted by requiring the employer to pay a higher rate for the overtime in excess of the statutory maximum number of hours than is paid for straight time according to the regular rate.
This purpose of section 7 of the Act, as this brief points out, clearly appears from its legislative history and background as well as from its judicial interpretation. See Bumpus v. Continental Baking Co., 124 F.2d 549; Missel v. Overnight Motor Transportation Co., Inc., 126 F.2d 98 (Certiorari granted February 16, 1942, ___ U.S. ___, 62 S. Ct. 641, ___ L. Ed. ___.).
In these recently decided cases, it is held that the regular rate" at which overtime is computed under section 7 ( 29 U.S.C.A., sec. 207) is not synonymous with the minimum wage schedule prescribed in section 6 ( 29 U.S.C.A., sec. 206); that the mere fact that an employee is paid the minimum wage prescribed in the latter section does not relieve the employer from the penalty of overtime payments where the hours of the workweek exceed the maximum prescribed in section 7 ( 29 U.S.C.A., sec. 207); and that overtime is incurred when the maximum number of hours is exceeded, even though the employee is entitled under his contract of employment to substantially more than the minimum wages set by Section 6 ( 29 U.S.C.A., sec. 206). In both cases the court declined to follow the contrary view as expressed in Fleming v. Belo Corp., 121 F.2d 207.
Certiorari granted, October 27, 1941, Fleming v. Belo Corp. (U.S.), 62 S. Cr. 137, 86 L. Ed. ___.
If the company's contention that it and the employee could, by agreement, fix the rate of compensation at a total of $35 per week, regardless of the number of hours worked, be sound, then the purpose of section 7 ( 29 U.S.C.A., sec. 207), which is to require additional compensation as the price of overtime employment, could be circumvented and nullified. For example: if 25 cents an hour be taken as Wittkamp's regular rate, with a guaranteed weekly salary of $35 under the agreement contended for by the company, it could have worked him 108 hours a week without paying him any additional compensation for overtime. (44 hours at 25 cents equals $11, plus 64 hours at 37 1/2 cents equals $24.)
The precise situation was before the court in Fleming v. Carleton Screw Products Co. (D.C., Minn.), 37 F. Supp. 754. There, as here, shortly before the effective date of the Act, the employer established an agreed rate of pay 10 cents less than what had been paid. Time and one-half based on the reduced rate was to be paid for all overtime work done in excess of hours, and if the total sum paid thus Computed did not amount to as much as the employee would have received for the same number of hours worked at his previous hourly rate, the employer would add as a bonus or gratuity at the end of each week such additional sum as might be necessary to guarantee to the employee the same weekly earnings he had theretofore received at his straight time hourly rate. Speaking of this agreement and its effect, the court said (p. 757):
Now on appeal to the Circuit Court of Appeals for the Eighth Circuit.
"It seems to me that the construction contended for by defendant to the effect that employer and employee may agree on a regular rate of pay regardless of what compensation the employee actually receives, will permit employers to avoid the obligations imposed by Section 7 and will completely nullify the overtime provisions therein contained. If an employer is permitted to establish an `agreed' rate of pay 10 cents below that which it in fact is, as plaintiff points out in his brief there is no reason why the regular rate could not be `stipulated' for purposes of overtime compensation at 20 or 30 cents below what it actually is and remove the penalty of Section 7 entirely. The fact that employer and employee `agree' to a rate of pay which does not represent that at which the employee is really employed cannot preclude the operation of Section 7 for private agreements which are inconsistent with wage and hour statutes must yield to the broader public policy declared in those acts." (Citing cases.) See also, Floyd v. DuBois Soap Co., supra ( 38 N.E.2d, at page 921), and cases there cited.
This brings us to the question as to what is the "regular rate" at which the employee's overtime must be computed under section 7 ( 29 U.S.C.A., sec. 207) of the Act. The court below instructed the jury, at the request of the plaintiff, "that if they believe from the evidence that the plaintiff worked 203 hours in excess of the hours he would have worked at the schedule of a 44-hour workweek, and that his regular rate of employment was $35 per week, then he was entitled to the sum of $1.18 per hour for overtime * * *."
Here the theory is that the regular rate is arrived at by dividing the weekly wage of $35 by the statutory maximum of hours, which results in a straight time rate of 79 cents per hour and a time and one-half rate of $1.18 per hour. No authority is cited in support of this interpretation of the statute and it is contrary to that adopted by the Administrator of the Wage and Hour Division.
In the Administrator's "Interpretative Bulletin No. 4" (November, 1940, revision) it is said:
"6. Overtime must be compensated at a rate not less than one and one-half times the regular rate of pay at which the employee is actually employed. The regular rate of pay at which the employee is actually employed is not the minimum wage rate set in the act, but is the employee's regular hourly rate of pay. * * *
"10. If the employee is on a weekly salary basis, his regular hourly rate of pay, on which time and a half must be paid, is computed by dividing the salary by the regular number of hours worked, or if no regular number of hours is worked, by the total number of hours worked each week. If the employee works a regular number of hours, the regular hour rate of pay will be a fixed rate, remaining unchanged from week to week. But if the employee works a fluctuating and not a regular number of hours, his regular hourly rate of pay will be the average hourly rate for the week and will vary from week to week. * * *"
This method of computation prescribed by the Administrator was approved in Missel v. Overnight Motor Transportation Co., Inc., supra ( 126 F.2d at pages 109, 110), where other cases dealing with the subject are collected. See also, Bumpus v. Continental Baking Co., supra ( 124 F.2d at page 553); Floyd v. Du Bois Soap Co., supra ( 38 N.E.2d at page 921).
Applying the Administrator's method of computation, which we adopt, Wittkamp's overtime for a "fluctuating" workweek totaling 51 hours should be calculated as follows: Dividing the weekly salary of $35 by the 51 hours worked gives 68.6 cents as the "regular rate at which he is employed." His total earnings for the week would then be as follows:
44 hours at 68.6 cents (straight time) ............... $30.18 7 hours at $1.03 (overtime at 1 1/2 x 68.6 cents) .. 7.21 ------ Total ..................... $37.39 ------
Since he was actually paid $35 for the 51-hour week, the company would owe him an additional $2.39 for overtime, plus an additional $2.39 as liquidated damages under section 16(b) ( 29 U.S.C.A., sec. 216(b)). The amount due for overtime and liquidated damages for each week should be calculated in a similar manner.
It follows from what we have said that the instruction granted by the lower court fixing the method of computation of Wittkamp's overtime and liquidated damages was erroneous.
It is further assigned as error that the court permitted Wittkamp to show that in a suit brought by the Federal Administrator of the Wage and Hour Division against the Tidewater Optical Company, Inc., in the United States District Court at Norfolk, the company had been enjoined from violating the Fair Labor Standards Act.
In our opinion such evidence was not admissible. Wittkamp was not a party to that suit and hence the decree in that cause was not res adjudicata in the present action. This evidence was prejudicial to the Tidewater Optical Company. It tended to show that the company had violated the Act in question on other occasions, and might have induced the jury to believe that it had likewise done so in Wittkamp's case.
The court should likewise have excluded evidence that other employees of the Tidewater Optical Company had made claims against it for overtime. Such evidence was irrelevant and likely to prejudice the minds of the jury.
The judgments complained of will be reversed and the case remanded for a new trial in conformity with the views here expressed.
Reversed and remanded.