ing, cleaning, dressing, eviscerating, extracting, grading, ginning, compressing, pasteurizing, drying, canning, cooling, or freezing of any such commodity, or the making of cheese, butter, or other dairy products; or * * *" For all of the reasons which we have advanced in this statement, we earnestly recommend that the agricultural exemptions now contained in the Fair Labor Standards Act be retained. AMERICAN MERCHANT MARINE INSTITUTE, INC., SENATOR PAUL H. DOUGLAS, Chairman, Subcommittee on Labor, Committee on Labor and Public Welfare, United States Senate, Washington, D. C. MY DEAR SENATOR DOUGLAS: It is my understanding that your subcommittee is currently conducting hearings on bills concerning minimum wage coverage and exemptions, principally S. 662. Last year when hearings were held on proposed legislation with respect to this same subject, the American Merchant Marine Institute filed a statement expressing opposition to S. 662. The institute is a trade organization composed of 55 United States steamship companies operating over 6 million gross tons of American-flag passenger, tank, dry-cargo, and collier vessels in the foreign and domestic trades of the United States. The institute, on behalf of its member companies, wishes to reaffirm its position and again go on record in opposition to those provisions of S. 662 which would amend the Fair Labor Standards Act of 1938, as amended, so as to (1) eliminate the exemption of seamen from the minimum-wage provisions of the act; (2) exclude the cost of board and lodging furnished seamen by the employers in connection with the computation of the minimum wage; and (3) define the term "American vessel" for the purpose of the act to include "any vessel which is defined as a 'vessel of the United States' in title 18, United States Code, section 9, or which is documented or numbered under the laws of the United States." The proposed change in the law which would remove the exemption of seamen from the minimum-wage provisions and provide a special method of calculation for determining conformity with the minimum wage appears even less necessary or desirable. Regardless of the Fair Labor Standards Act, and regardless of the fact that they have never been covered by that act, seagoing workers have been able to make advances in earnings and conditions which go far beyond those won by most other classes of American workers. We urge that, in considering proposals which may be desirable to amend the Fair Labor Standards Act, no amendments which would change the present exemption of seamen from the minimum wage and maximum hour provisions or alter the extent of application of the law, be approved. It is hoped that in your deliberations you will take into consideration the views expressed herein, and will include this letter in the record. Respectfully, HERBERT R. O'CONOR. STATEMENT SUBMITTED BY NORMAN A. BARTH, ATTORNEY FOR THE J. R. WATKINS, Co., WINONA, MINN. Gentlemen, my name is Norman A. Barth. I reside in Winona, Minn., and am an attorney for the J. R. Watkins Co., on whose behalf I am submitting this statement in the matter of certain proposed amendments to the Fair Labor Standards Act. The J. R. Watkins Co. was established in 1868 as a manufacturer and wholesaler of household and farm supplies. As part of an extensive line developed principally for the farm family, Watkins brand products include household and farm disinfectants, insecticides, fungicides, mineral and vitamin feeding supplements for livestock and poultry, spices, packaged medicines, flavoring extracts, toilet preparations, household and veterinary remedies, cleansers, waxes, and polishes. The home office of the company is in Winona, Minn. Two manufacturing plants are operated, and there are branch offices in 15 cities from coast to coast. Over a period of 88 years, the principal activity of the company has been the manufacture of merchandise for sale to independent dealers who trade on their own account, purchasing merchandise for resale at self-determined prices to All merchandise is consumers on a farm-to-farm and house-to-house basis. sold f. o. b. our plants or warehouses and become the property, unconditionally, of the dealer upon delivery to the carrier to deal in or dispose of as he sees fit. Dealers to whom the company sells merchandise are entirely independent in their business operations, free by agreement and in fact, from control by the company in all respects. They fall under the self-employed classification in the Social Security Act. I submit this statement with reference to specific proposed amendments to the Fair Labor Standards Act now under consideration by this subcommittee, as follows: 1. In favor of retaining the outside sales person exemption as it is now contained in the act An outside sales person is an individual who is compensated on the basis of results and not on the amount of time he devotes to his own business. He carries on his business entirely away from the premises of the supplier from whom he purchases his merchandise. As the term applies to a dealer engaged in the sale of Watkins brand products and other articles dealt in by this company, such an individual buys merchandise from us at our wholesale prices for resale at self-determined retail prices, to his own customers from farm-to-farm and from house-to-house. All the expenses of operating his business are paid by him. This includes the cost of operating his car or truck, insurance, freight, and taxes on equipment and merchandise, advertising, bad debt and inventory losses he might incur. He maintains his own place of business and operates a vehicle which brings a store on wheels to the door of his customer. He may handle other lines of merchandise, not being confined exclusively to the sale of merchandise offered by this company. We would have no conceivable way of determining the number of hours each such individual may devote to calling upon his customers, or the kind of merchandise he is selling, because he is doing business entirely on his own account, free from control by us. Such dealers are located in all of the various States. The only certain test of such an individual's value to us is the amount of merchandise purchased by him at our wholesale prices. Obviously that is governed principally by a dealer's own financial goal, his initiative, aptitude for the business, and his ability to provide regular and dependable service to his own customers. I earnestly recommend for your very serious consideration that no change be made in the Fair Labor Standards Act which would repeal the outside-sales-person exemption because, instead of providing benefits for independent dealers in Watkins products, repeal of this exemption will destroy the dealer's present opportunity to enjoy an income from a business of his own in direct proportion to his own ambition and his desire for the better things of life. 2. In favor of a definition of "employee" as proposed in Senate Bill 1437 by Senators Capehart and Curtis The definition of the term "employee" as contained in this bill follows the common-law concept as distinguished from the concept which has been applied administratively and in the courts on the theory of "economic dependence" or "economic necessity." This definition will clarify the definition of "employee" as presently contained in the wage and hour law, and will make the Fair Labor Standards Act consistent with the term "employee" as adopted by Congress in the Unemployment Compensation Act and the Social Security Act. The relationship between the company and the dealer in Watkins products is one of vendor-vendee. It contains none of the elements of employment, and no possibility of injecting such elements, no matter how much the company might want to do so, or to exercise control over the number of hours a dealer may devote to his own independent business. There would be no way of knowing the accuracy of time reported by a dealer if he were called upon to furnish such information, and it would be uneconomic to a disastrous degree to impose on any business, elements of control to any extent to which it cannot be exercised. Courts have handed down decisions under which self-employed persons, recog nized as such in the Unemployment Compensation Act and the Social Security Act, have been classified as employees and subject to wage and hour requirements. This yardstick is inconsistent with the common law doctrine established under the Unemployment Compensation and Social Security Acts, and as a result we have been left in a state of hopeless confusion because of this conflict. Congress has overwhelmingly indicated its position on many occasions that where elements of employment are not present, the employer-employee relationship should not be imposed. It is, therefore, inconceivable that Congress intended that an individual would be an independent contractor under the Unemployment Compensation and Social Security Acts, but an "employee" under the wage and hour law. The same impelling reasons heretofore set forth with respect to a dealer in Watkins products being placed in a perilous position if he loses his self-employed status, requires that we go on record for a consistent coverage of these various acts, and we urgently recommend approval by the subcommittee of the definition of the term "employee" as contained in Senate bill 1437 to make the Fair Labor Standards Act consistent with other Federal statutes in the social field. 3. In opposition to any proposal to change the salary floor in the executive and administrative exemption under the act Any amendment which would raise the salary floor to this class of employee would be very undesirable as to both employer and employee, and would have a very serious effect on our business because it would directly affect a number of junior executives, supervisors, and foremen now exempt under the present limitation of $325 a month. This class of employee in our company, are, for the most part, young people, ambitious to succeed and to obtain promotions. They are compensated for the job each is trained to perform, and not necessarily for the number of hours worked during any one weekly period. Each is now free to work toward his own self-advancement. Overtime rules must be applied fairly and impartially as to all covered employees. Therefore, regardless of the inclination or ambition of the employee who is anxious for self-improvement and advancement, under the law, as well as for personnel reasons, the company would be required to clear its offices, laboratories, and other work areas after scheduled hours. Although ambitious employees may, of their own choice, wish to apply themselves to further education and self-advancement in their work, they would not be permitted to do so. If any change is made in the salary floor for this type of employee, obviously salary increases would not automatically follow because in our marketing and distribution operations the consumer dollar can carry only so much of the overburden of the selling expense. Accordingly we would be forced by economic necessity to reorganize our work forces, resulting in a return of many of our junior executives, supervisors, and foremen to a time clock status. We have found, by discussion with them that they value their freedom and independence in their work very highly, and that they would be resentful to the extreme of a change which would cause them to lose their exempt status and result in their being placed on a time clock. Such a reorganization would be stifling to the personal incentive they now have. Because our senior executives come from the large group of junior executives and administrative employees, the application of punch-clock control will represent a loss to these employees by a downgrading in their respective jobs, and the loss to this company would be a swift and inevitable lowering of morale and efficiency that can only cause friction, and the eventual replacement of normally valuable employees. For these reasons I respectfully urge and recommend that no change be made in the administrative-executive exemption in any manner whatsoever. Respectfully submitted. NORMAN A. BARTH, Attorney, the J. R. Watkins Co. NATIONAL ASSOCIATION OF HOUSE TO HOUSE INSTALLMENT COMPANIES, INC., SUBCOMMITTEE ON LABOR, Senate Committee on Labor and Public Welfare, The Capitol, Washington, D. C. June 1, 1956. SIRS: This memorandum is submitted by the National Association of House to House Installment Companies, Inc., a national trade association composed of 363 member firms engaged in the business of direct selling from house to house on the installment basis. It is estimated that annual sales of this industry exceed $1 billion. This association represents a majority of all established house-to-house sellers in the industry and its membership accounts for more than one-half of all sales made by the house-to-house installment method. It is estimated that its members employ more than 12,000 outside salesmen whose average income is in excess of $5,000 per year. This association is opposed to the enactment of any legislation which would eliminate the exemption now granted to outside salesmen under the Fair Labor Standards Act. The reasons for the exemption under the original act still exist and we know of no valid reason for a change. The exemption for outside salesmen was included in the original act because of the very nature of the job. An outside salesman does not work a prescribed shift, nor does he have regular hours such as other employees. He is not subject to the control of his employer in the performance of his work. His starting time, the number of hours he works, and the time when he works are almost completely within his control and cannot be ascertained by outside sources or objective methods. He frequently spends considerable time in traveling to and from his customers. Circumstances may require that he see his customers at unusual times of the day or even in the evening. The irregularity of his hours and his job renders the position of outside salesmen incompatible with coverage under the Fair Labor Standards Act. The outside salesman who works on a commission basis does not receive an hourly wage rate nor are his earnings computed on a daily, weekly, or even monthly basis. He is paid directly in proportion to his ability to make sales. The position does not need the protection afforded by minimum rates. There are no outside salesmen in this industry-and perhaps in any other industry in the United States-who earn less than the statutory minimum over a yearly period. On the contrary, outside salesmen are paid many times the minimum prescribed by statute, this notwithstanding that in all industries, there are factors which tend to reduce the income of outside salesmen for short periods of times. A new employee in a new territory must build up his good will and his customer lists and generally earns little during his early weeks of employment although he generally progresses to the point where his earnings become substantial. Outside salesmen everywhere make this initial sacrifice (if it can be so labeled) in the interests of building up a job with great potential earnings. Seasonal fluctuations also render an outside salesman's job incompatible with the protection of the Fair Labor Standards Act. During the summer months when many customers are away on vacation and business pressures ease, earnings and sales are reduced as they are also in the month following Christmas. Every industry has its own seasonal fluctuations during which times it is possible for outside salesmen whose yearly incomes exceed $5,000 to have their weekly or even monthly income drop below the statutory minimum. In many industries salesmen spend many weeks taking small sample orders through which they later derive substantial compensation when large reorders are placed. In addition, weather frequently produces earning fluctuations. In New England a snowbound salesman may not be able to travel extensively for weeks at a time and during a severe winter, weeks and even months might go by during which a salesman might not even earn his basic money. These low incomes would, of course, be made up in the weeks and months that follow. The job pattern thus presented is one that is incompatible with the Fair Labor Standards Act. Indeed, removal of the outside salesmen exemption would create immense administrative problems and would serve to extend the coverage of the act to a group that does not need this protection. On behalf of the National Association of House to House Installment Companies, the undersigned urges that the present exemption of outside salesmen from the Fair Labor Standards Act be continued. Respectfully submitted. EDWARD L. SARD, Executive Director. STATEMENT OF JOHN H. TODD (ITS EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL) ON BEHALF OF NATIONAL COTTON COMPRESS AND COTTON WAREHOUSE ASSOCIATION, MEMPHIS, TENN. The bills before your committee, notably, the Lehman bill (S. 662) and the Murray bill (S. 770), would extend the coverage of the Fair Labor Standards Act to and perhaps beyond the extreme limits of the constitutional power of Congress. They propose to extend coverage of the act to all employees in, about or in connection with any enterprise wherein their employer is engaged in any activity affecting interstate commerce. The definitions of the "production" of goods for commerce, and of "any activity affecting commerce," are so broad as to extend the coverage of the act to its ultimate conceivable limits, even under the ultraliberal construction now placed by the Supreme Court on the commerce clause of our Constitution. Under the liberal construction certain to be applied to the proposed amendments by the Supreme Court, even locally owned corner groceries and locally owned, local-service, laundries would be covered, in the absence of specific exemption. The Lehman bill would impose the overtime premium on all hours worked in excess of 8 hours per day. The Murray bill would shorten the permissible workweek at straight time wages from 40 hours to 35 hours. S. 662 would repeal specific provisions for the "Belo employment contracts" under which employer and employee can now agree upon a stable minimum amount of regular weekly compensation where hours of work necessarily fluctuate because of conditions beyond the control of either. S. 662 would extend the statute of limitation from 2 years to 6 years. Both S. 662 and S. 770 would restrict the application of the wage and overtime exemption for workers on farms to those farms hiring fewer than 3, or fewer than 6, full-time workers. Both bills would also extend coverage of the act by changing the definition of "produced" by eliminating the phrase "closely related and directly essential" to the production of goods for commerce to read simply "necessary" to the production of (or work on) goods for commerce. In this connection the word "necessary" has been construed by the courts as meaning hardly more than "incidental." We oppose all of these proposals as inimical to the general welfare of our Nation and its economy. We especially oppose and request the committee to disapprove the following proposals: (a) Restriction of the section 13 (a) (6) exemption for agricultural labor; (b) repeal of the partial overtime exemption for persons employed in seasonal industries provided in section 7 (b) (3); (c) repeal of the partial and total overtime exemptions provided in section 7 (c) for certain processes on agricultural and horticultural commodities; and most especially (d) repeal of the exemption from minimum wage and overtime provided in section 13 (a) (10) for persons employed within the area of production engaged in handling, packing, storing, ginning, compressing, pasteurizing, drying, preparing in their raw or natural state, or canning of agricultural or horticultural commodities for market, or in making cheese or butter or other dairy products. For the purposes of this 13 (a) (10) exemption for certain operations on farm and orchard products, and also for the purposes of one of the exemptions contained in section 7 (c), the act authorizes the Administrator of the Wage and Hour Division, United States Department of Labor, to define "the area of production" of agricultural and horticultural commodities. This authority was transferred from the Administrator to the Secretary of Labor by Reorganization Plan No. 6 of 1950, and was later administratively redelegated by the Secretary to the Administrator. None of the administrators of the Wage and Hour Division has been sympathetic to such exemptions. Almost since the effective date of the act, the respective administrators and the Labor Department have complained to the Congress of this and other exemptions, and asked for their repeal; or, in the alternative, have asked for broad plenary powers of administratively determining who shall and who shall not be exempt. They have undertaken to leave the impression that this particular exemption (sec. 13 (a) (10)) and a proper definition of "the area of production" of farm and orchard products are impractical, if not impossible, of administration. To anyone who has followed the matter closely, these contentions are sheer sophistry. The exemption has never been given a fair trial. No real effort has ever been made to formulate a definition of the area of production of any farm or orchard product which is realistic and reasonable, and which would carry out the intention of Congress. The area of production has been variously defined by the respective administrators in terms of the number of persons employed in the plant where the named operations are conducted, in terms of the population of the town where such plant is located, in terms of the populations of points from which farm and orchard products are transported to such plants, and in terms of the distances which such commodities move to reach the plants where such opera |