To begin such an employee on an hourly rate also defeats this essential social purpose, because executive duties simply do not follow standard clocked time patterns. To a lesser extent, but still significant, beginning administrative employees are in the same category. They must be free to exercise their talents in aid of their individual economic progress. They must be free to serve their employers both in and outside of office hours.

Industry thus needs a beginning salary low enough to invite an employer into experimenting with young and promising men, to take a chance in permitting a man to prove himself without immediate costly consequences to his employer. The existing minimum salary levels administratively determined by the Wage and Hour Division work fairly well in these respects except in small businesses and we suggest that any increased minimums will seriously mitigate against the welfare of small business generally.

This association on the other hand herewith earnestly requests your determination against raising minimum salary levels for outside executive and administrative employees working in the feed industry. For all the reasons obviously inherent in the factual practices of the feed industry in marketing their products to the farmers of this Nation we seriously urge that increased salary levels for personnel who appoint, train, and supervise direct salesmen in the field will further and disastrously disrupt an industry sales practice already in difficulty because of the impact of existing wage and hour regulations. We can confidently predict that increased salary minimums will definitely and certainly result in either decreased sales of commercial feeding stuffs in a large segment of the industry or will artificially increase the cost of such sales distribution to a large segment of the livestock feeders of the Nation.

Application of the Fair Labor Standards Act and the present regulations pertaining thereto cannot be effectively or equitably applied to outside salesman in any category and this result has been previously recognized by the specific exemption of such personnel in the regulation. In this section of this presentation we deal with personnel who in sales practices, hours of work, recordkeeping, administrative control, and in practically all other respects operate under conditions which have heretofore impelled the exemption of outside salesmen. The only discernible difference lies in the fact that these particular employees do appoint, train, and supervise in varying degrees other commission salesmen and thus technically fall within the regulatory definition of an administrative or executive employee. But these administrative services are still performed outside and away from any control of the employer and at times which cannot be conformed to any regular workweek and under circumstances wholly without any reasonable concept of the area of American employment designed to be stabilized by the Fair Labor Standards Act.

There is simply no practical way to place these many thousands of executive and administrative employees under the control demanded by the Fair Labor Standards Act; and any attempt to do so would serve no discernible social benefit to the American economy but would conversely disrupt and dislocate needed sales mechanisms for a great industry and substantially deter and perhaps eliminate employment of many men now desiring to gainfully utilize their time in needed services to people. To further tamper with these sales practices as suggested in S. 662 can only mitigate against that singular attribute of American business known as individual incentive. These men are commission salesmen and they hire, train, and supervise for compensation derived from the volume of sales they and their men produce. They desire to work under those conditions and are without administrative control in the handling of their sales practices. They are both confused and impatient with artifically imposed restrictions which merely result in particular employment classifications, with attendant artificial rules. wholly unrelated to the central purpose of their activity. These men merely want to sell as much as they can in any way they can and take what commissions inure from their efforts. This is not an area of "slave labor" nor are the men imposed upon by harsh employment practices. They are completely free to do as they please and they are measured for discharge only by the amount of sales they poduce.

For all the reasons above set out, we earnestly urge the subcommittee of the Senate Committee on Labor and Public Welfare having charge of hearings on this bill to disapprove section 9 thereof to the extent that it relates to section 13 (a) (1) of the Fair Labor Standards Act and that such provision be not favorably reported to the Senate of the United States of the 84th Congress for action.

II

We herewith also register definite and sincere opposition to the provisions of section 9 of S. 662 as it relates to amending section 13 (a) (1) of the Fair Labor Standards Act and the provisions of section 7 of S. 3310 as it relates to amending section 13 (a) (1) of the Fair Labor Standards Act in deleting from the act the provision exempting "outside salesmen" from the coverage thereof. While we may describe in detail the many, many adverse consequences to our economy which would flow from the passage of these particular sections of these bills, and could delineate to the committee the myriad circumstances under which both the employee and the employer would measurably suffer by reason of the imposition of minimum wages and hours upon "outside salesmen," we here confine our remarks in opposition to these particular sections of these particular bills by stating that

1. "Outside salesmen," by the very nature of their employment, are not susceptible to control as to hours worked and any limitation placed upon them pertaining to the time and place they are privileged to exercise their talents as salesmen will inevitably mitigate against the best interests of the employee himself.

2. The bill would make it impossible for the Administrator or anyone else to write a regulation which would equitably and effectively define when such an outside salesman's efforts on behalf of his employer ended on a particular day and when they took on the aspects of personal enterprise. 3. An outside salesman cannot maintain standard hours of employment for he can work at any time during the day or night and on weekends. His is the particular "touch" which accomplishes a sale and it may take him a minute or many days.

4. Restriction of hours and establishment of minimum hourly rates of pay for an outside salesman will inherently and inevitably curtail the sales efficiency of the whole American business economy; first by artificially restricting the salesman in his efforts or conversely, by restricting the number of such salesmen which an employer may economically employ and, second, by unnecessarily and artificially increasing the cost of distribution of commerce to the consumer.

5. The number of people which would be affected by the deletion of the outside salesmen exemption is such that in our opinion the whole economy of our Nation would be substantially and adversely disorganized and dislocated.

6. Deletion of the outside salesman exemption would not provide cognizable benefits to people of the United States and will be resisted by the great majority of outside salesmen themselves, because they do not want restriction of their activities in any respect and second, many of them would know that guaranteed minimum salaries would necessitate either their discharge or transfer of employment.

III

We also herewith register our approval of the provisions of S. 1437 providing for the application of common-law rules for determining an employer-employee under the act for the reason that such a provision will bring much needed uniformity in the application of the various Federal statutes administratively dependent upon a legal determination of such relationship. At present the Administrator of the Fair Labor Standards Act does not in all respects apply the common-law rules for determing the existence of employment for coverage under the act and S. 1437 is a much needed amendment to the act to bring rhythm and uniformity to the administration thereof.

IV

Again, without here detailing our specific reasons therefor, please accept this statement of our opposition to the provisions of S. 3310, S. 662, and also S. 2748 and S. 770 whereby they amend section 3 of the act by defining “activity a fecting commerce," as any activity necessary to commerce or competing with any activity in commerce, for the reason that this section substantially extends the coverage of the act into areas of human activity where wage and hour control on a uniform national basis is both unnecessary and detrimental to the parties affected. It would effectively destroy any concept of local business control and 78155-5643

would immasculate the basic American philosophy of leaving control of the activities of men to the States except where national welfare is clearly involved. The present limitation on the coverage of the act to those activities directly essential to the production of goods for commerce and to activities so closely related to commerce as to be practically a part of it is in our opinion wholly adequate and effective to accomplish the purposes of the act as originally defined in the declaration of policy promulgated by Congress.

We thank you for your courtesy and consideration for permitting us to file this statement of our views with the subcommittee.

STATEMENT OF JOHN H. WATERS, GENERAL ATTORNEY, WESTERN UNION TELEGRAPH Co.

My name is John H. Waters. I am general attorney of the Western Union Telegraph Co. On May 4, 1955, Mr. G. S. Paul, vice president in charge of operations for Western Union appeared before this subcommittee and urged the retention of section 13 (a) (13) of the Fair Labor Standards Act, which provides for an exemption for employees or proprietors of retail or service establishments who act as local agencies for the acceptance and delivery of telegrams in small communities where the volume of messages is too small to justify the maintenance of a company office.

I understand that the purpose of these hearings now is to bring the facts and figures up to date and to focus attention once again on the central problem of extended coverage. My statement therefore is short and will bring our facts and figures up to date and will summarize the company's position which was more fully stated by Mr. Paul and to which we respectfully refer the committee.

The proprietors of these agencies operate the retail merchandise or service establishments found on the typical main street of small communities throughout the United States. They may operate a drug store, grocery store, hardware store, radio and electrical store, clothing store, or furniture store. The operations of these stores come within the meaning of "retail or service establishments," as defined in clause 2 of section 13 (a) of the act and their employees are FLSA exempt.

As of December 31, 1955, Western Union had a total of approximately 10,902 agencies. Of this number 7,980 were telephone agencies where the message was telephoned into the company's branch office. The remaining number of 2,922 are what is known as teleprinter agencies, that is, a teleprinter is installed on the agent's premises and the messages are sent and received over this instrument which is connected with the company's branch office. Approximately 10,800 of these agencies had telegraph message revenue of less than $500 per month. There are about 6,100 agencies in small communities usually having a population of 5,000 or less, which depend solely on this type of representation for telegraph service. About 1,427, or nearly 18 percent of the agencies whose revenue is less than $500 per month are located in the 5 States represented by the members of this subcommittee.

Telegrams at these agencies are ordinarily handled by telephone or teleprinter between the agent and the telegraph company. The agency is established by a written contract and is terminable on short notice. The proprietors of these local establishments do not depend on the compensation received for handling telegraph business. It is only an incidental part of their regular established business. Telegraph messages are handled on the agent's own premises and the agent provides the space and pays all expenses associated with his place of business. He receives payment from Western Union at a rate which varies between 10 percent to 75 percent of the gross message revenue handled by the agent. The company exercises no degree of control as to the hiring or firing of the agent's employees, or the hours of work, or the rates of pay. Many of these local establishments are located 25 or more miles away from the nearest Western Union office and the company has no first hand knowledge of the details of the normal work and business of the agent. They are in all respects independent contractors. Prior to the enactment of section 13 (a) (13) Western Union and these local proprietors were faced with a conflict of two court decisions. One Federal court of appeals ruled that such agents were employees of the company, while another Federal court of appeals ruled that such agents were in fact independent contractors rather than employees and not subject to the FLSA. In the absence of the clarification afforded by section 13 (a) (13) these proprietors of small local

establishments would have refused to enter into an agency contract with Western Union, since to do so would lay them open to the claim that the proprietors and their own employees became subject to sections 6 and 7 of the act if they were to handle even a single Western Union telegram. These proprietors would not jeopardize their exempt status under the act for the small amount of money they would receive for handling telegrams. Furthermore, they are not equipped or geared to maintain the necessary statutory records. For its own part Western Union could not assume the responsibility to see that the provisions of sections 6 and 7 were observed with respect to agency employees whose numbers, hours of work, qualifications, employment and whose discharge and whose very identity were completely beyond its knowledge or control. Furthermore, it could not assume the additional expense resulting from the application of the statute because of the handling of the small amount of telegraph business.

For these reasons section 13 (a) (13) was written into the statute in 1949, after full committee hearings to facilitate the establishment and maintenance of telegraph service in thousands of small communities which otherwise could not be served. We urgently request that this exemption be retained in the law in order that Western Union can continue to bring telegraph service to these thousands of small communities which otherwise would have no telegraph service. I wish to thank the committee for affording me this opportunity to present these facts.

STATEMENT OF MARSHALL E. LIVINGSTON

I am

My name is Marshall E. Livingston of Newark, New York State. attorney and partner in the firm of Wright & Livingston, general counsel to 15 companies which are engaged in manufacturing, producing, and distributing cosmetics, nursery stock, flat silverware, both plate and sterling, china tableware, costume jewelry, and other products, direct to the consumer through personal contact selling by independent salesmen.

These independent salesmen are, of course, in direct competition with local retail establishments, whose employees are exempt under the provisions of section 11 of the Fair Labor Standards Act. The exclusion of these salesmen from the act has never been questioned in view of the specific exclusion in section 11 of outside salesmen.

Regardless of policy and other considerations determinative of the exemption of employees of local retail establishments, or of city or traveling salesmen, the relationship between our companies and the independent salesmen who sell our products, and their manner of operating, make utterly inconsistent their coverage under the Fair Labor Standards Act. That act presupposes a situation where the employer can ascertain and control the hours worked and fix an hourly rate of pay, but the arrangements between our companies and these salesmen, and the practical surrounding situation, preclude knowledge of or control over when, where, and for how long the salesman works. Furthermore, the salesman receives no wages. Whether he earns nothing or a very substantial amount for the work he does in a day depends entirely upon his own industry, ability, and other factors uncontrolled and uncontrollable by the company. Whatever other changes may be made with respect to coverage under the Fair Labor Standards Act, we believe that coverage of door-to-door salesmen, such as those who sell our products, would be virtually impossible to administer or for us to comply with. It would be, in effect, virtually a mandate that we abandon our way of doing business-the distribution of our products through independent, door-to-door salesmen.

We feel certain that this abandonment would not be in the public interest. Door-to-door selling presently offers a lucrative opportunity to persons whose domestic situation or physical condition precludes their obtaining a regular job. The salesmen of products of the companies we represent are self-employed independent contractors. Thus it might well appear that because the Fair Labor Standards Act applies only to "employees," these self-employed salespeople would not be affected by the outside salesperson exemption. It is to this proposition that I wish to address myself specifically.

The Social Security Act, The Unemployment Tax Act and the Labor Relations Act all presently define "employee" in substance as "any individual who under the usual common-law rules applicable in determining the employer-employee relationship has the status of an employee." This unanimity of definition in these 3 acts came about by reason of extended congressional consideration

beginning in 1947. Prior to 1947 the term "employee" had not been specifically defined and out of the Hearst Newsboy Case (N. L. R. B. v. Hearst Publications, Inc., 322 U. S. 111), arose the congressional definition in the Labor Relations Act, and by reason of the Silk and Greyvan cases, U. S. v. Albert Silk (331 U. S. 704) and Harrison v. Greyvan Lines, Inc. (331 Ú. S. 704), arose the congressional intervention in 1948 resulting in House Joint Resolution 296 and later, in 1950, in H. R. 6000 or Public Law 734 (1950) (Social Security Amendments of 1950). The term "employee" or "employment" has never been legislative defined in the Fair Labor Standards Act since its inception and, by reason of the "outside salespersons exemption" in the act itself, the status of whether or not outside salespersons were "employees" never came into question, because the act itself exempted all "outside salespeople."

However, the Wage and Hour Administration from time to time has been called on to determine who was an "employee" and what "employment" meant under the Fair Labor Standards Act. No definition of employee or employment is set forth in the statute, and the Wage and Hour Administration, following the Fair Labor Standards Act decision in Rutherford v. McComb (331 U. S. 722), has followed generally the broad "economic dependency" tests set forth in the now "overruled" decision of the Silk and Greyvan cases.

I say "overruled" because Congress did, in 1948 and again in 1950, reiterate and make unmistakable its intent that the term employment and employee should be measured by the principles of the common law, and not the "economic dependency" test of Silk and similar cases.

Therefore, it is our considered judgment that an elimination of the outside salespersons exemption would thus require that Wage and Hour Administration to determine for the first time whether or not these "outside salespersons" were "employees" of the firms for whom they sell.

I can categorically state that such outside salespersons are not "employees" of the firms whose merchandise they sell and that it was this very relationship in large part which caused the Congress in 1950 to provide special coverage for the "self-employed" persons.

Thus the Wage and Hour Administration, having no clear-cut definition of employee and employment, would naturally fall back on this present administrative interpretation based on the Silk case, which has been discarded by Congress in the parallel situations of Federal labor, unemployment, and socialsecurity laws.

I bespeak a practical uniformity of these social laws. The committee should, I respectfully suggest, review the 1937 hearings and testimony on the subject of how the outside salesperson exemption came to be written into the law in the first place. I respectfully submit that the reasoning then is as equally applicable and just as sound today. The principles have not changed nor the good reasons therefor.

The other hearings I cite in relation to the 1948-50 action of Congress in relation to amending the social-security, unemployment, and labor laws all contain relevant, well-considered, and pertinent testimony which clearly shows (1) why employees who are outside salespeople should be exempt, and (2) why outside salespeople should not be considered employees under the Fair Labor Standards Act.

Therefore, we urge your committee

1. To reject the proposed current bills to strike out the exemption of outside salespeople; and

2. To write in as further clarification of the act an amendment defining "employee" in terms similar to those expressed in Senate bill 1437.

STATEMENT OF B. A. PERHAM, PRESIDENT, PERHAM FRUIT CORP., YAKIMA, Wash.

Pursuant to a telegram to the undersigned dated May 8, 1956, from Mr. Stewart E. McClure, staff director on labor and public welfare, United States Senate, I herewith wish to present a statement on pending bills relating to coverages and exemptions under the Fair Labor Standards Act.

My firm operates about 525 acres of fruit orchards in the Yakima Valley, Wash. We also pack, cold store, and market for about 325 growers in addition to our own grown fruit. Many of these growers operate only a limited number of acres, which do not justify operating their own packing and storage facilities. Such growers' fruit we handle in a pool on consignment basis, making a per ton or per box charge for services rendered, including washing, sorting, packing, and