intended that the Constitution be so tortured to extend the powers delegated to the Central Government. There are certain areas of doubt in the present coverage picture which have arisen as a result of the complex nature of the critical questions of coverage and exemption. In the retail furniture field it is illogical and discriminatory to contend, as does the Wage-Hour Division under present policy, that certain employees in the warehouse or office of one firm are covered because they serve more than one exempt retail store unit (establishment), while the employees of a firm of comparable size or larger are all exempt if the latter firm has only one retail store. Last year NRFA called this problem to the attention of this subcommittee and urged that the coverage question be resolved so as to eliminate this anomaly. We again urge that this problem and similar problems encountered by retailers who happen to be located near the borders of two or more States, be resolved on the basis of equitable treatment extending the exemption to all personnel of retail firms in such situations. Finally, we submit that this is not a moral question. In connection with wages paid in the retail and service industries, there are questions of economics and sociology involving the employment of millions of persons. These questions can be related directly to the productivity of the individual, and the point at which Government fiat precludes the employment of marginal personnel. Also a part of this picture is the vast training ground for thousands of young Americans who have never previously had any business experience or contact with the business world. The lower paid jobs obviously are in thousands of cases stepping stones to higher attainment in the business and professional world. As such, these stepping stones must continue to be open to young America; they will remain open only so long as it remains economically feasible for employers to absorb the young and inexperienced, as well as the aged, physically handicapped, and other marginal types of employees. This measure of flexibility, freedom, and self-determination must be preserved for local enterprise. Federally imposed rigidity can wreak damaging consequences for local small business and the millions of persons it now gainfully employs. Senator DOUGLAS. That concludes the witnesses for this morning. The next meeting of the committee will be on Friday at 10 o'clock. (Thereupon at 11:40 a. m. the committee adjourned.) AMENDING THE FAIR LABOR STANDARDS ACT OF 1938 THURSDAY, MAY 18, 1956 UNITED STATES SENATE, COMMITTEE ON LABOR AND PUBLIC WELFARE, SUBCOMMITTEE ON LABOR, The subcommittee met, pursuant to call, at 10 a. m. in room P-63, the Capitol, Washington, D. C., Senator Paul H. Douglas (chairman of the subcommittee) presiding. Present: Senators Douglas and Goldwater. Also present: Stewart E. McClure, staff director; John S. Forsythe, general council; Michael J. Bernstein, minority staff director. Senator DOUGLAS. The committee will come to order. I will call as our first witness Mr. Rowland F. Kirk, managercounsel of the National Automobile Dealers Association. STATEMENT OF ROWLAND F. KIRK, MANAGER-COUNSEL, NATIONAL AUTOMOBILE DEALERS ASSOCIATION Mr. KIRK. Mr. Chairman, we would request the privilege of filing our statement with the committee, if that is agreeable, sir, rather than reading it. Senator DOUGLAS. It will be printed in the record. Mr. KIRK. I appreciate that very much, Senator. (The statement reads as follows:) STATEMENT PRESENTED BY THE NATIONAL AUTOMOBILE DEALERS ASSOCIATION SUMMARY The National Automobile Dealers Association, representing more that 28,000 franchised new car and new truck dealers opposes any proposals to extend minimum wage laws under the Fair Labor Standards Act of 1938 (Public Law 718, 75th Cong.), which are designed to limit and diminish the existing retail or service establishment exemption, for the following reasons: 1. Limitations imposed by these proposals would have the effect of discriminating between competing automobile dealers. 2. Similar discriminations between dealers and competitive retail and service establishments would result. 3. The Fair Labor Standards Act never was intended to apply to a local automobile dealer. 4. The nature of a dealer's business makes it impracticable for him to comply with the requirements of the law. 5. The term "affecting commerce" used in these proposals is too vague to enable the average dealer to determine whether he comes within the coverage of the law. NADA resectfully requests that the subcommittee: 1. Preserve the retail and service establishment exemption now contained in the Fair Labor Standards Act in its present form. 2. To reserve to the several States any regulation of the wages and hours to be observed in local retail and service establishments. Mr. Chairman, my name is Frederick J. Bell. I am executive vice president of the National Automobile Dealers Association. I wish to thank the committee for the opportunity to appear and express our views with respect to the pending legislation under consideration by your committee. At the outset may I say the position presented to you today is the same as that presented to this committee in May of last year when this same subject was under consideration by this committee. Our position is unchanged and we sincerely trust that the law will remain unchanged. The association's membership comprises approximately 28,000 new car and new truck retail dealers, engaged in selling goods and services in their respective communities to local consumers. This membership extends into every State and congressional district in the United States and comprises approximately 70 percent of the total number of franchised dealers in the country. Our appearance here today is pursuant to action of the Board of Directors and the general membership of the association, taken at our annual meeting in Washington in January of this year. The association is opposed to any change in the present law which would extend coverage of the Fair Labor Standards Act to retail automobile dealers doing a gross annual dollar volume business in excess of $500,000. Traditionally, NADA has opposed legislation which would limit or diminish the existing retail and service establishment exemption and extend Federal wage-and-hour coverage to franchised automobile and truck dealers. We have taken this position because such limitation or extension of coverage would create unjust discriminations and impose inequities and unreasonable hardships on those dealers who would be covered. We are here today to reaffirm and reassert that position. The overwhelming majority of retail automobile dealers are local small-business men. The typical franchised automobile dealer engages in the following activities: (a) He sells new motor vehicles, as well as used vehicles which are accepted in trade, and parts, tires, batteries, and accessories. Today the ratio of used vehicle sales to new vehicle sales is approximately 2 to 1; (b) He engages in repairing automobiles, trucks, and farm tractors; and (c) He services motor vehicles and in this connection operates a gasoline filling station and grease and wash racks. Practically all of the retail dealer's customers are ultimate consumers in his community. These customers are both private and business users of motor vehicles. The principal work force of an automobile dealer is composed generally of salesmen, repair mechanics, servicemen and clerical workers. The typical retail automobile dealer does not come under the present law by virtue of the retail and service establishment exemption. The present legislative proposal, however, would extend the coverage to dealers with a gross annual business in excess of $500,000. Such extension of coverage would have discriminatory effects. These proposals would place some dealers under the wage-and-hour standards of the law and exempt others, notwithstanding the fact that exempt and nonexempt dealers may be located in the same community, be in keen competition with each other, use the same type of labor, and employ pay practices which are similar if not identical. Our records show that more than 19 percent of the dealers of the country would be subject to the minimum wage and overtime requirements of the law if the proposed legislation is enacted. Most of these are dealers who sell the more popular lines of automobiles because they have the largest dollar volume of business. This would mean that mechanics, servicemen, and other employees of such dealers would come under the coverage of the law, while the same classification of employees of dealers in other lines of cars, who have a lower volume of business, would not come under the law's coverage. Hourly earnings and pay rates of automobile mechanics, servicemen, etc., are substantially the same in a particular locality, irrespective of the size of the dealer's establishment where the mechanics or servicemen may work. Hence, the unfairness of a $500,000 classification as applied to automobile dealers is immediately apparent. There is no justification for discriminating between competing automobile dealers whose employees perform identical services and are compensated on substantially the same basis. Moreover, in operating repair shops and service stations, automobile dealers are also in direct competition with independent garages and filling stations which do not sell motor vehicles, and most of whom would be exempt. Because the dealer is selling a high unit cost product he may be made subject to the act notwithstanding that he has only a few employees and a small place of business. On the other hand, other retail and service establishments having larger places of business and more employees would be exempt because they sell low unit cost products. Because of the nature of the services which the automobile dealer renders in most communities, he is required to offer such services to the public during 6 days of the week. These services are an indispensable part of local transportation, and the local community is vitally dependent upon them. It would be virtually impossible to limit the work of the dealer's employees to 40 hours per week, as contemplated by the objectives of the law. Most dealers' establishments are too small to introduce a shift system of employment. Hence, most dealers would have to pay overtime penalties on a regular basis. Today, the average dealer cannot afford to absorb additional financial burdens. The foregoing is true, whether the individual dealer does an annual volume of business of over or under $500,000. The $500,000 limitation, therefore, is irrelevant to the question of whether the automobile dealer should be exempt from the law. Furthermore, the application of the overtime provisions to employees of the automobile dealer would be extremely burdensome because of the difficulty of computing overtime pay for the automobile mechanic who in many communities receives a guaranteed minimum rate, plus a piece rate, plus incentive bonuses. This difficulty was clearly demonstrated in our industry during the period prior to the 1949 amendments, when many dealers were regarded by the Department of Labor as covered by the law. During this period, many dealers made an attempt to comply with the law, but found that their attorneys and accountants were unable to advise them definitely as to how overtime should be computed. It will be virtually impossible for any dealer to determine in the first instance whether he comes within the increased coverage provided for in the pending proposals. This is so because the proposed increased coverage would extend only to employees of an employer who is engaged in an activity "affecting commerce." There is no more illusive concept in the law than the concept "affecting commerce." Nor is the term in any way clarified by the definitions which appear in the proposed legislation. Penalties for violation of the Fair Labor Standards Act are very severe, since they provide for retroactive double liability plus attorney's fees and criminal punishment. An employer who is to be made subject to the act should be apprised of that fact in clear and unambiguous terms. To impose upon him the impossible task of determining whether his business is one "affecting commerce" is to fail to inform him of his responsibilities and punish him for violations of which he is unaware. As heretofore pointed out the retail automobile dealer is a local businessman and we oppose the extension of the act to him because of the local character of the business he operates. The law as originally written was intended to exempt him. As President Roosevelt stated in proposing minimum-wage legislation to Congress in 1937: "there are many purely local pursuits and services which no Federal legislation can effectively cover." Then Senator Black (now Mr. Justice Black), the sponsor of the legislation in the Senate, expressed the same view when he said: "businesses of a purely local type which serve a particular local community, and which do not send their products into the streams of interstate commerce, can be better regulated by the laws of the communities and of the States in which the business units operate." The franchised automobile and truck dealers' establishments are typical of the local businesses referred to in these quotations. The dealer is required to adjust himself to the demands of his community, whether it be agricultural, mining, or industrial and regardless of its size. In selling and servicing cars he is furnishing essential transportation services in his local community. He does not compete with dealers in other States or usually even with dealers in other communities in the same State. He competes with dealers in his hometown. Conditions vary greatly from community to community. Local working conditions cannot be made uniform by a single national standard. Therefore, the impact of the proposal to extend the law to retail automobile dealers would vary greatly between different communities. If the wages and hours of retail automobile dealers are to be regulated, it should be done by the States which are in |