AMENDMENTS TO THE FAIR LABOR STANDARDS ACT OF 1938 MONDAY, JANUARY 31, 1949 HOUSE OF REPRESENTATIVES, COMMITTEE ON EDUCATION AND LABOR, Washington, D. C. The committee met, pursuant to adjournment, at 10:20 a. m., Hon. John Lesinski (chairman) presiding. Mr. LESINSKI. The meeting will come to order. Gentlemen, we do not have a quorum present, but if there is no objection we will continue the hearings and wait until the quorum arrives. Is that all right, Mr. Gwinn? Mr. GWINN. Surely. Mr. LESINSKI. Any objection? (No response.) Mr. LESINSKI. The first witness scheduled is John H. Waters, general attorney for the Western Union Telegraph Co. Mr. WATERS. Thank you, Mr. Chairman. TESTIMONY OF JOHN H. WATERS, GENERAL ATTORNEY, WESTERN UNION TELEGRAPH CO. Mr. WATERS. My name is John H. Waters. I am general attorney of the Western Union Telegraph Co. It is understood that the purpose of these hearings is to consider desirable changes in the Fair Labor Standards Act. With that objective in mind and because of a grave situation confronting the telegraph industry, we urge for your consideration an amendment which would exclude telegraph agencies from the possible application of sections 6 and 7 of the act. Western Union has served the Nation since 1851 and it is our function to furnish telegraph service wherever it is needed in the United States. Of course, this does not mean that we must operate an office in every little hamlet, but within the limitations of our means we believe it is our responsibility to see that telegraph service can in some way reach as many points as possible. It was in pursuance of this policy that thousands of telegraph agencies were established. We believe this to be in the public interest. Telegraph service through agencies is as old as the telegraph indusdustry itself. Western Union as of December 31, 1947, had a total of 11.476 agencies principally in local stores and service establishments. The number at the end of last year is not yet available but is substantially the same. Of these agencies, 5,723 are in small communities, usually having populations of 5,000 or less, which depend solely on this type of representation for direct telegraph service. The remaining agencies perform a supplementary function in support of other established forms of telegraph representation, affording a more convenient telegraph service to the public. It is only through agency coverage that the company is able to provide telegraph representation in many small towns. Thus, without agency arrangements many places would be denied direct service and many others would be denied the convenience and extended hours of service available through agencies which supplement the telegraph company's own offices. Agency arrangements are made with the proprietors generally of retail and service establishments. A recent sampling showed the following types of business acting as telegraph agents: Drug stores, 33 percent of total telegraph agencies; other local stores, general merchandise, radio shops, electrical supplies, auto accessories, 20 percent; real estate and insurance offices, 9 percent; hotels, 9 percent; bus terminals, 6 percent; railway express agencies, 3 percent; independent telephone companies, 3 percent; miscellaneous, 17 percent. Telegrams at these agencies are handled by telephone, teleprinter, or messenger between the agent and the telegraph company. In effect, the telegraph agency is comparable to other agency arrangements, such as fourth-class post offices, ticket agencies, and collection agencies for gas and electric companies. The telegraph company exercises no degree of control as to hiring or firing of the agents' employees nor of the hours of work or rates of pay. There is no regularity or continuity of work for a fixed period or definite duration. The duration of the relationship is controlled by contract with the agents. There is no requirement that the personal services of the agent or of a particular employee of the agent be devoted to telegraph service. Telegraph service at agencies is conducted on premises absolutely controlled by agents and removed from Western Union. Details of the agent's work or of his nontelegraphic earnings cannot come within the first-hand knowledge of Western Union. Proprietors of local establishments who agree to serve their community as telegraph agents do not depend upon commission received for handling telegraph business. Telegraph operations are an incidental part of the agent's regular established business. An example of an agency which makes it possible to bring direct telegraph service to a small community is the Dickie's drug store at Blairsville, Pa., a community of 5,000, or about 1,400 families. Mr. W. N. Dickie has been the Western Union agent at Blairsville for the past 6 years. This agency handles 20 sent and received messages a day. Messages for the community are transmitted to and from the agent by teleprinter, through the Western Union message center at Pittsburgh, Pa., 35 miles distant. The functions involved in handling telegrams at such agencies are but a relatively small part of the agent's local activity and seldom, if ever, require the assignment of additional work time. For example, at Dickie's drug store the 20 messages, scattered throughout the day, may be handled by Mr. Dickie or any one of his two employees over a spread of 1212 hours daily. It is these incidental telegraph transactions which, according to the Wage and Hour Administrator, would automatically make the agent and workers in his local establishment employees of the telegraph company subject to the requirements of the Fair Labor Standards Act. Continuance of these agencies and the service they provide is in serious jeopardy as a result of action brought by the Administrator of the Fair Labor Standards Act in July 1945 against Western Union in the United States District Court for the Eastern District of Kentucky at Lexington. This action charged that such agents, like W. N. Dickie of Dickie's drug store, in seven places in Kentucky and their employees who handle telegrams are subject to the provisions of the Fair Labor Standards Act despite the fact that they are primarily engaged in local selling and servicing of the retail business of the agent. The seven Kentucky agents referred to in the case were: Midland Trail Hotel, Morehead, Ky., L. S. Odell, auto dealer, Georgetown, Ky.; Cynthiana Hotel, Cynthiana, Ky.; Colonial Hotel, Irvine, Ky.; Coakleys insurance agency, Harrodsburg, Ky.; Miss L. M. Rose, Nicholasville, Ky.; and Mrs. C. F. Woodridge, Versailles, Ky. The district court and the Circuit Court of Appeals for the Sixth Circuit decided in favor of the Fair Labor Standards Act Administrator. The Supreme Court denied our petitions for writ of certiorari. Our petition to the Supreme Court for writ of certiorari was predicated in part upon a decision in a similar action in which the United States Circuit Court of Appeals for the Fourth Circuit ruled that persons acting as telegraph agents were not employees of the telegraph company. This ruling said in part: Yet when the complaint and the contract here are read together, a number of determinative factors appear. No single factor, of course, is controlling. But the over-all picture, the totality limned by these factors in their entirety, amply justify the decision of the district court that [Plaintiffs] Blankenship and Patrisk were independent contractors rather than employees [of Western Union], thus were quite beyond the purview of the act. We now set out some of these factors with brief comments. The primary and, of course, most important business of the plaintiffs was the operation of the Guyandotte Hotel, for which the partnership was formed. The telegraph agency was merely one out of a number of incidents of the hotel busi ness. The court also said: The telegraph agency was operated on premises absolutely controlled by the plaintiff. These premises were far removed from the defendant, and the office, to which plaintiffs reported and from which they received instructions, was not in Mullens but in Beckley, another town. The daily number of hours worked by the plaintiffs and many details of their work could not be within the first-hand knowledge of Western Union. The court went on to say: It is clear that the plaintiffs were not required to devote their full and exclusive time to the telegraph agency. Obviously, a great advantage to the plaintiffs was that they could give to the telegraph agency odds and ends of their time, on which the hotel clearly had first call. The telegraph company now has before it two conflicting court decisions. It is in the public interest that the industry be relieved of the liability placed on it by the decision of the Sixth Circuit Court of Appeals. If that decision were made applicable to all agency operations throughout the country substantial administrative difficulties, apart from the burden of cost, would be involved in meeting the terms of the decision. Western Union could not assume the responsibility to see that the provisions of sections 6 and 7 are observed with respect to a vast number of agency employees, a number probably total ing 30,000. We know, of course, who the 11,476 agents are but who they hire in their establishments is entirely beyond our control. Many local retail and service establishments would be unwilling to keep records and be subject to inspection and possible liability for a function which is merely incidental to the establishment's principal business and would accordingly refuse to act as agents of the telegraph company. At some agencies the agents themselves, as well as a number of their employees, handle telegraph messages at odd times during the day. It would be practically impossible to keep a record of the time all of these people spent handling telegraphic messages and the agents undoubtedly would refuse to undertake such a burden. In some instances the time spent keeping records would probably exceed the time spent handling messages. The company obviously could not undertake to provide telegraph service to the 5,723 small communities now served by agencies by the establishment of company-operated offices. The cost of operation in relation to income would make continuance of the service to these agency points totally uneconomical. To illustrate, the estimated monthly revenue for the 5,723 small communities averages $100 a month and the minimum cost for a company-operated office is approximately three times that revenue, exclusive of the cost of handling the telegrams at the other terminating or originating point and en route. The telegraph company, therefore, recognizing its responsibility to the public, and wishing to insure continuance of this essential public service, urges that the exemptions in section 13 (a) of the act be amended to include the following: Any person or any employee of a person, not otherwise covered by this Act. handling telegraph messages for the public under an agency or contract arrangements with a telegraph company where the telegraph message revenue of the agency does not exceed $750 monthly. Our proposal of a $750 revenue limitation gives consideration to the fact that virtually all of our existing agencies fall within that amount. In this connection the committee's atention is called to the fact that the present act contains an exemption in favor of small telephone exchanges. That exemption applies to small telephone exchanges having less than 500 stations. By applying an estimated telephone rental of $3 per station per month we arrive at a total revenue exemption of at least $1,500 for the 500 telephone station maximum provided for in section 13 (a) of the act. Under the proposed bill the exemption would apply to exchanges employing only one operator on duty at a time. On the assumption that one operator is capable of handling at least 200 telephone stations, this exemption would still amount to a revenue exemption of about $600 per month. Under the proposed exemption, Western Union is not seeking exclusion from the act of its employees at company-operated offices. We are limiting our appeal strictly to contract agents and their employees. Only the exemption sought will relieve the company of the extremely confused situation and insure continuation of a service medium which is distinctly in the public interest. Now, in supplement of that written statement, gentlemen, I would like to say this: That, as previously stated, the telegraph company has utilized agencies from the time of its very beginning. The railroad companies have handled telegraph business at stations. We have used drug stores, hotels, and other places where there are telephones, and let me point out to you, gentlemen, that in 1931 we had, I believe, some 10,000 agencies throughout the United States. The point I am making is that we had these telegraph agencies long before anyone thought of the Fair Labor Standards Act, so these agencies were not devised to avoid the Fair Labor Standards Art. About 1927 the teleprinter machine was perfected, and that enabled the telegraph company to set up agencies in drug stores and hotels through this teleprinter machine. The teleprinter machine is not complicated at all. It operates just like a typewriter, and anybody who can use a typewriter can operate a teleprinter machine. About December of 1947, I think, we had about 15,000 of these agencies. The act was passed in 1938. It did not occur to any of us that the act would have application to these hotel owners, drugstore owners, and other service establishments. We felt that we had no control over them or over their employees as to when they hired or fired them, and it just did not occur to us that there was any necessity to ask for an exemption in favor of these agencies. We just felt that the act did not apply, as there was so little of the telegraph service at these points. About 1942-this is 6 years after the act was passed, and during the war-we had some talks with the Administrator in the Office of the Wage and Hour Division in New York, who raised the question as to whether or not the act applied to some of these agencies. As a result of the talks and his investigation at that time, he accepted our conclusion that these contract agency arrangements were not subject to the act, although he said that he considered that there was a legal question there, but that for the time being-that is, during the war-they would not investigate these agencies-also that if there was any change in his thinking along that line he would let us know about it before anything was done. The next thing that occurred was the suit which was brought in Kentucky, to which I have referred. I do not make any point of the fact that the Administrator did not tell us about it, because I appreciate that there is a turn-over in the Government, and that perhaps the people with whom we had this understanding had gone. However, the suit was brought against a hotel corporation, Blue Grass Hotels, Inc., and Western Union. The complaint charged that the hotel and the company were the joint employers of the people who operated the teleprinter machine which was in the hotel lobby. At the time-during the continuance of the suit-the Administrator moved to amend the complaint to bring in 15 more agencies, and alleged that there were violations at those 15 places. Then during the trial the Administrator voluntarily moved to dismiss the complaint with respect to some seven of these agencies, and it was made clear by the court that he was passing only on the eight agencies that were left in the complaint, and that he was not going to make any adjudication as to the seven that had been dismissed. The district court rendered no opinion. It entered a judgment based on findings of fact and conclusions of law, and enjoined the telegraph company from permitting any persons, or suffering or permitting |