Another argument to show that by and large hotels are engaged in interstate commerce is the recent suit by the United States Justice Department against the Hilton Corp. The suit charged the Hilton Corp. with being a monopoly, and was settled when the corporation sold the Roosevelt Hotel in New York City and other hotels in other cities.

If the position of the AFL-CIO were adopted as outlined by President George Meany when he appeared before this committee and asked that all hotels be brought under the act that do an annual business of $500,000 or more, many of the other hotels in New York City would also be affected.

For example, there are chains such as Spencer Taylor hotels that have seven hotels in New York City-The Madison, One Fifth Avenue, Beaux Arts, the Surrey, the Mayflower, Peter Cooper, and the Towers. These particular hotels employ another 700 of the members of our local union. (See attached exhibit C for a listing of chains operating only in New York State.)

Another indication of the interstate nature of New York City hotel operations is the people who stop at the hotels. Certainly New York City, which in many ways is the hub of the world, is not just housing people from the State in the hotels. The New York Visitors Bureau estimates that an average of 13 million people every year spend at least 1 night in a New York City hotel. Some of them are the people who come in for the over 700 conventions which were held in New York City last year. There are others who come into New York to transact business in the garment and textile industries, in the advertising, shipping, television, and publishing industries. Space does not permit listing here the major corporations of this country that have their head offices in New York City. All of the people staying in these hotels are affecting, and are engaged in, interstate commerce.

To sum up, we contend the workers in this industry are in need of Federal coverage if the purpose of the act that is "to correct and eliminate labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being" is to be fulfilled. Further that the hotel industry is in a position to pay adequate wages and that the hotel industry is indeed one that is engaged in interstate commerce.

We would appreciate the opportunity of appearing before your committee to amplify the information contained in this statement.

EXHIBIT A

Estimated number of establishments and workers and numbers included in the survey by size of establishment, all-year hotels, April 1953

EXHIBIT B

Over 10,000 of the members of this local working in the hotels are employed in hotels that are part of chain operations. In New York City the following hotels are controlled by corporations that have hotels in States other than New York.

Source: 1955-56 Directory of Hotel Systems published by the American Hotel Association Directory Corp.

EXHIBIT C

Hotels in New York City owned by hotel chains operating only in New York State.

Source: 1955-56 Directory of Hotel Systems published by the American Hotel Association Directory Corp.

STATEMENT BY PETER W. JANSS, EXECUTIVE SECRETARY, NATIONAL MINERAL FEEDS ASSOCIATION, INC., DES MOINES, IOWA

The undersigned, Peter W. Janss, is executive secretary of the National Mineral Feeds Association, Inc., having its headquarters at 212 Equitable Building, Des Moines, Iowa.

The National Mineral Feeds Association is a corporation not for pecuniary profit performing services usually offered by a trade association and is supported by some 110 companies. The great majority of these companies merchandise commercial feedstuffs for livestock and poultry by direct sales thereof to the feeder on the farm. Most of the companies represented by this association originally sold mineral feeds for livestock and poultry, but at the present time their line of merchandise has expanded to cover a full line of protein, vitamin, and mineral supplements and some are now proposing the marketing of what is known as complete ration feeds by the same method of distribution. This association does not represent directly all companies marketing commercial feedstuffs by means of direct selling mechanisms to the customer-feeder nor does it represent all the many companies who are otherwise engaged in selling commercial feedstuffs through different means of sales distribution.

This appearance is undertaken to register before the Senate Committee on Labor and Public Welfare opposition to section 9 of S. 662 as it amends section 13 (a) (1) of the Fair Labor Standards Act and to Section 7 of S. 3310 as it amends section 13 (a) (1) of the Fair Labor Standards Act and all bills presently before the committee of similar import, and to support the passage of S. 1437.

I

Directing our remarks first to the provisions of S. 662, we respectfully submit that increased statutory salary minimus for administrative and executive employees will have peculiar and particular adverse effect upon all businesses engaged in selling their merchandise by direct selling mechanisms and passage of the bill will disorganize and dislocate a substantial segment of our American economy.

Concisely stated, it is a position of this association that increased minimum salary levels for executive or administrative employees so engaged

1. Will substantially reduce employment honestly desired by active, energetic aspirants to better their economic condition through independent action sparked by individual incentive;

2. Will seriously disrupt standard patterns of sales promotion long indulged in by many small concerns in the feed business whose previous operation in such respect has been devoid of criticism and earnestly supported by its sales employees;

3. Will have the effect of actually driving into bankruptcy or liquidation a great many of such concerns;

4. Will cause geographical and industrial diversities in the commercial feed business tending to produce serious economic dislocations; and

5. That the employees herein discussed should, in any event, be exempted from the act as "outside salesmen."

Practically all of the companies selling feeds direct to the customer-feeder employ two kinds of administrative and executive employees. The first category are employed and perform their work entirely upon the actual premises of the manufacturing plant or plants owned by the particular concern and are hereinafter referred to as "inside employees." The second category are employed and perform their work at no particular site and are engaged both in the recruitment and supervision of other direct selling personnel and in the actual work of selling the products themselves and are hereinafter referred to as "outside employees."

Such outside employees have previously been employed under varying contract arrangements designed to suit the particular needs of the particular company in marketing their several feed products through direct sales. But by far the greater number operate under contracts providing straight commissions plus overriding commissions. Personnel are recruited by sales managers and where necessary are given special training at home office expense and then assigned to a particular geographical territory with purpose to introduce or expand the sales of the company's products in that territory initially by their own efforts and in due course by appointing, training and supervising other parttime or full-time salesmen who are, in turn, usually given either all or a great

part of the straight commission afforded the particular administrative or executive employee with the company.

These companies will appoint State sales managers who will supervise district managers who, in turn, sometimes supervise county managers. Under the county managers are commissioned salesmen performing only outside sales work. The larger of these companies will generally have a well integrated territorial sales structure following geographical lines above indicated. A great many of the medium sized or smaller companies will, perforce of circumstance, bypass or avoid the appointment of a so-called State sales manager and will enter a new territory with appointment only of a district manager who may have one or more counties or sometimes will bypass both a State and district manager and appoint only a manager having a territory coextensive with a single county. In quite a few instances the smaller companies will find a man in a given territory and assign him only a few townships in a county with authority to appoint subsalesmen under him. Again depending upon circumstances a company will appoint a so-called State manager who, in turn, will actually work only a county within that State. The smaller companies attempt to expand their sales territory by finding men who will represent them in territories of varying size anywhere within a radius conducive to an economical distribution of their products. It follows that we find a wide variety of sales employees in these companies who will perform executive or administrative duties with reference to subsalesmen in widely varying degrees which do not accurately fall within the typical sales title which has been assigned to the particular individual. For the most part any guaranteed minimum weekly salary to this type of manager imposed by the regulations of the Fair Labor Standards Act has no economic relationship to the work these men perform and the affect of a statutory imposition of these guaranteed minimum weekly salaries compels the company to decide whether a particular man possesses a prior commission earning record or has a potential commission earning record sufficient to justify an artificial guaranteed minimum weekly salary, failing which, the company is impelled to either discharge the man or reclassify him to a mere outside sales

man.

Some of these employees are full-time salesmen long schooled in direct selling and are capable of earning substantial commissions easily in excess of the minimum salary levels prescribed by the regulation, but many others are retired farmers, young men going to school, or men who operate during their "off" season of other regular employment. It is impossible to undertake control of the hours of work of these men and practically all of them exercise complete personal control over the time and the manner in which they perform their work. Some will work very hard for a week and then do nothing for a succeeding week, others will work when they feel like it, and many of the older employees will not leave their residence during bad weather. Others will spend sufficient time to employ "subsalesmen" and then do very little in their own behalf. Notwithstanding the varied idiosyncrasies of operation, the method has been found successful for distribution of products to the farmer by means of direct sales.

A great many of these men being part-time or semiretired will not earn in commissions averaging either $55 or $75 a week, and certainly most of them will not earn such amounts in every workweek. There are, of course, others who are full-time workmen possessing a record of commission sales quite sufficient to justify guaranteed minimums and who have inner compulsions to work regularly to improve compensation over so-called guaranteed minimums. But by far the greater share would be contrarily impelled if they were guaranteed minimum weekly wages. Practically all incentive for working would be lost. The scheme of distribution would be essentially destroyed. The problem is of sufficient seriousness that a great many of the companies now distributing their products by this method would be forced to liquidate or otherwise go out of business if guaranteed minimum salary levels for administrative and executive employees were raised.

While this association represents some of the major feed companies distributing by direct sales it must be understood that the practice of selling feeds direct to customer feeders extends through the whole feed industry in varying degrees. Recent studies indicate that an increasing number of feed companies, both small and large, and manufacturing all kinds of commercial feeding stuffs, are now beginning to employ the direct selling mechanism. Farmers in a great Corn Belt more and more demand service on the farm. They are businessmen possessing a substantial investment in the land, machinery

and livestock they operate. Their weekly feed purchases are of a kind and volume to attract personal service on the farm. With the increasing advent of vitamins, antibiotics, drugs, hormones, and special growth promoting substances incorporated into the feeds they buy, more and more technical service on the farm is required in order to properly use such feeds. All this impels feed companies into direct selling as a method for servicing their customers. The ranchers of the Southwest, again because of their investment and size of their business, demand and receive the services afforded by direct sellers. On the east coast and on the west coast where livestock production in recent years has been singularly concentrated in large establishments the customer rightly demands and receives personal services on the farm. Poultry raisers particularly, with their large broiler houses, laying houses, and hatcheries, no longer go to the feedstore and buy their materials off the shelf. The feed salesman, and sometimes a whole battery of nutrition experts, serve these customers on their respective premises. These needs increasingly compel use of the direct selling mechanism in one form or another and all these companies, of necessity, are or will be involved with the same problems hereinbefore described.

The industrial and geographical magnitude of this inquiry is aptly illustrated by the fact that in Iowa the feed industry is the third largest enterprise in dollar volume. While we cannot accurately portray similar statistics in other States we are confident that the whole Corn Belt would, upon investigation, find a similar statistical consequence.

Any dislocation, either industrially or geographically, of the industry which performs this extensive and vital service to the agriculture of America remains of prime importance to our whole economy. We can, and do, confidently predict that any ruling or law which artifically increases the cost of distributing feed products and which will tend to mitigate against free competition in this already highly competitive field, can and will peculiarly result in added cost to the farmerfeeder whose present serious economic condition already commands the constant consideration of the best political and business economists of the Nation. On page 3 of the Senate committee report which accompanied Senate bill 2475 (1937), President Roosevelt is reported to have said:

"Even in the treatment of national problems there are geographical and industrial diversities which practical statesmanship cannot wholly ignore.

"As we move resolutely to extend the frontiers of social progress we must be guided by practical reason and not by barren formulas."

We here seek to pinpoint a particular industrial area affecting wide geographical consequences wherein the application of higher minimum salary levels to administrative and executive employees simply does not work to the benefit of social progress or the welfare of the people or any substantial part thereof, and wherein the particular demands and needs of a substantially important segment of our economy requires the preservation of a sales mechanism which has long been tested in practice and operation, and which now seems destined to provide an increasingly needed service to agriculture.

We here file no particular brief for a particular minimum salary level for inside executive or administrative employees in the feed business except to point out that in the industry we here partially represent a great many of the manufacturing plants are located in small communities where beginning salary levels do not reach $55 and $75 a week, respectively. We here also point out that the existing salary levels for executive and administrative employees are much closer to existing salary practices than is the minimum rate of $1 applicable to hourly employees. Any increase in such minimum weekly salary levels will have different social consequences than an increase in the minimum hourly rate, because administrative and executive employees are not and cannot be assigned routine repetitive tasks and success in a given employment depends upon individual initiative, incentive, personality, and individual acumen. Upon initial employment no employer can successfully tell whether a particular executive employee will measure to the needs of the position. Most of them are hired on probation with careful and constant evaluation of their performance by superiors. If they are found worthy the minimum salary levels are usually exceeded early in the tenure of their employment. But to require starting salaries at an impractical rate mitigates against the whole purpose of training and creating competent executive and administrative employees. A higher rate tends to create economic satisfaction in the mind of the employee and certainly reduces the incentive needed to produce that peculiar initiative necessary in modern business.