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 My name is Marshall E. Livingston of Newark, New York State. I am 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 U. 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 cold storage. Much fruit in the Yakima Valley area is produced and handled by cooperatives who handle their grower members' fruit based upon actual cost factors. Such competition renders small margins for the noncooperative operators. We are forced to pass on increased costs for materials, supplies, labor, etc., to the grower. Increased costs of cooperatives also are assessed to their grower members. The past season many growers have not fared well due to prices on certain varieties and grades of fruit having not brought back production and other costs. This past winter the growers have suffered very heavy damage to the 1956 crop, as well as a tremendous loss in fruit trees. This tree damage and loss will greatly reduce production for several years to come. We are strongly opposed to the elimination, as proposed in some bills, or any modification of the present total exemptions provided for agriculture under section 13 (a) (6), or for the packing or processing of fruits and vegetables under section 13 (a) (10), or the partial exemptions under section 7 (b) (3) or section 7 (c), which relax the provisions requiring payment of time and one-half for hours in excess of 40 for seasonal industries and for packing or processing fruits and vegetables and other agricultural commodities. Perishable fruits must be harvested immediately when they are mature. Cherries, apricots, peaches, and other fruits are highly perishable and must be marketed with as little delay as possible. You cannot harvest or pack fruit during our harvesting season on an 8-hour-day or 40-hour-week basis, because fruit doesn't observe any such week. If packing plants are forced to pay overtime over 8 hours a day or 40 hours a week during these peak emergency periods, costs would be materially forced upward. These costs we would have to pass on to the grower. The only other alternative, in order to hold down costs, would be to reduce our volume to one that could be handled within a 40-hour week and refuse to accept much fruit from these smaller growers. These smaller growers would be in a bad squeeze to get their fruit packed. They would have to pay higher packing charges to some packer who was willing to pay this overtime and pass it on to the grower, or else would be forced to sell their fruit at a price below the real value to someone who could get it packed. It is therefore very plain to see how the small grower would be placed in a serious disadvantage position in competition with a larger grower who may be able to pack his own-grown fruit that could be handled on a straight-time rate. If the volume of fruit placed on the market is reduced in this way, the consumer would automatically face higher prices. The Congress wisely provided exemptions for overtime for agriculture seasonal industries when the law was passed. This was done after mature consideration and a recognition of the difference between industries whose production can be regulated and perishable agriculture, which is subject to forces beyond the growers' control. Hours of work in an orchard or packing plant cannot be regulated as they can in a factory. We now pay above the $1 per hour minimum to experienced hourly workers in our plants. Experienced pickers and packers, who work on a piece rate, average higher than the hourly workers. We are forced, however, especially on piecework, to employ during the height of the operating season much inexperienced help, such as high-school and college students. Although the experienced pieceworkers will earn well over the $1 per hour minimum, many inexperienced workers will make, on piecework basis, all the way from probably 60 to 75 cents per hour; yet now we are compelled to pay them $1 per hour. Under these circumstances we are forced to do one of two things. If the inexperienced cannot shortly reach production close to the minimum wage, we are forced to dispense with their services. For the experienced pieceworkers who are earning about minimum or slightly above, there is little encouragement for them to speed up, for alongside of them the inexperienced workers who are on a piece basis probably are only producing from one-half to possibly three-fourths of the output of the experienced workers, but they are earning practically as much money. This has a tendency to slow down output at a time when the fruit requires speeding up output. Perishable fruits cannot wait for rules and regulations. All of this results in increased costs and slowing down of operations. Any further increase in the minimum wage, in our industry, would be a very serious handicap to our growers, who can ill afford it. I trust this report will be helpful in your deliberations. Re Fair Labor Standards Act. Hon. LISTER HILL, Senate Office Building, ASSOCIATED RETAIL BAKERS OF AMERICA, Washington, D. C. DEAR SENATOR HILL: Your disapproval of proposals to discontinue or curtail section 13 (a) (4) of the Fair Labor Standards Act is earnestly requested by the Associated Retail Bakers of America. This is the exemption of local retail establishments which both meet the other tests for such establishments provided in section 13 (a) (2), and are recognized as retail establishments in their particular industries, notwithstanding that they themselves make or process the goods they sell. It is intended to clarify and insure the exemption of neighborhood retail bakeries, candy shops, ice-cream parlors, custom tailor shops, etc.-the exemption of which as local retail establishments had been denied or threatened by the Wage and Hour Division prior to 1949 because they made what they sold (Legislative History of Fair Labor Standards Amendments of 1949, including Conference Report to Accompany H. R. 5856 (H. Rept. No. 1453, 81st Cong., 1st sess.), pp. 26-27). Our testimony in support of the exemption during your current series of hearings was on May 5, 1955, and appears at pages 1167-1170 of part 2 of the printed transcript. In addition to the general principle that retail neighborhood shops should be exempt from this Federal Act, there is additional and urgent reason in respect to retail bakeries, in that their skilled handcraft work requires a relatively long workweek, which is taken into consideration in the prevailing high straight-time wage rates, but which would not be taken into consideration in a statutory requirement of time and one-half those straight-time rates for hours above 40 per week. Should you desire any further information from us concerning section 13 (a) (4), we would deeply appreciate opportunity to supply it. Chairman, Subcommittee of the Senate Committee on Labor, Senate Office Building, Washington, D. C. DEAR SENATOR DOUGLAS: After a conscientious review and study of Senate bill 3310, to amend the Fair Labor Standards Act of 1938, as amended, to provide greater coverage for employees of food industries whose activities affect interstate commerce, and for other purposes, the Corn Belt Livestock Feeders Association wishes to state its opposition to this bill for the vast livestock feeding industry in the United States. The livestock feeders, who annually supply a huge part of the red meat consumed in this country, are extremely concerned about conditions affecting the food industry, and are particularly vulnerable to increases in the costs of proeessing and merchandising foods. An examination of the United States Government reports reveals that the marketing spread-the difference between the value of food products at the production level and the value of these same foods at retail-is constantly increasing, with the result that farmers and livestock people are receiving a decreasing share of the consumers' dollar spent for food. In 1945 the farmers' share of the consumers' food dollar was 53 cents, while at the end of 1955 it was reported at 41 cents. Subsequent reports have placed the 1955 figure at a slightly lower level. On meat and meat products, in par ticular, the average percentage of the consumers' dollar received by livestock producers was 67 percent in 1947-50. It declined to 56 percent at the close of 1955. At the same time, marketing charges, much of which are labor costs, have risen 70 percent in the last 10 years. With the 1947-50 average as 100, food marketing charges have moved from 70 points in 1945 to 119 points in 19575 |