Mr. GWINN. I am anxious about that; our chairman may be going to jail here.

Mr. KING. He complies because he is in a metropolitan area.

Mr. LESINSKI. We are in a metropolitan area, and we pay the top wage of $1.30, and then it grades up.

Mr. KING. He may be put in jail if he has not complied with the forms.

Mr. LESINSKI. We have complied with the forms, and we pay time and a half, and on Sundays double time.

Mr. GWINN. What is the penalty?

Mr. LESINSKI. There is no penalty, and I think every retailer in our community does that. It is in the smaller communities, then, where the question of explanation comes in; what happens to the smaller yards in the smaller communities that are owned by a big corporation which ships the material in. The little yard gets the best material, while we fellows have to wait for it.

Mr. KING. You mean you are in an unfair competition position? Mr. LESINSKI. They themselves have put up that unfair competition. The warehouse interests must have four or five yards throughout the country.

Mr. BAILEY. Mr. Chairman, that does not coincide with the idea sold to the committee at the morning session, that the consumer fixes the price; it is too often fixed for him; is it not?

Mr. LESINSKI. It is always fixed for him.

Mr. KING. But, Mr. Chairman, according to the law, your yard is not a retail yard.

Mr. LESINSKI. That was never intended by Congress.

Mr. KING. It may not have been intended.

Mr. LESINSKI. Because I have sat on the committee since 1933, I happen to know what the intent of Congress is-to see that labor gets fair wages-and I believe in fair wages.

Mr. KING. That is right, I do too.

Mr. GWINN. Mr. Chairman, do you think the intent of Congress is the important thing, or the intent of the Administrator?

Mr. LESINSKI. The thing to do is what I have always in previous days spoken about, to spell out exactly the intent of Congress. Mr. GWINN. Yes.

Mr. LESINSKI. And then I think we will get somewhere. If the intent of Congress is that 40 hours a week be the standard, and time and a half after that, that is the way it should be paid, and I think the man who chisels should be fined. The man who does pay it has nothing to fear.

Mr. IRVING. You were speaking of a contractor going to a yard and buying material to build a house; would he not get a discount?

Mr. LESINSKI. No, there is a price set, that is what he pays.

Mr. IRVING. I have a friend who can go pretty nearly anywhere, and through his connections with a certain midcontinent company, he gets a discount on anything he wants to buy. I would not call that retail, even though he buys it at a retail store.

Mr. LESINSKI. The OPA devised a new plan, the over-the-counter plan, plus 10 percent. We do not use it though.

Mr. KING. May I comment on that?

Mr. LESINSKI. Yes.

Mr. IRVING. I am looking for information.

Mr. KING. I have several children so I go to the Safeway store and I can buy more than 6 quarts of milk at one time, and they tell me I can have my milk for 18 cents, and the average family, with no children, pays 19 cents. Because I pay less is that a wholesale sale on a quantity discount?

Mr. IRVING. I never heard of that.

Mr. LESINSKI. Mr. Irving, here is the difference: A contractor comes in and gets a truckload of lumber, say, 5,000 feet, and it does not cost any more to deliver that than for a retail customer to come in and buy a hundred feet, and he also wants it delivered. It is a question of the time you spend with the truck, and what you pay for delivery that has to be taken into consideration.

Mr. IRVING. That is reasonable, I will admit.

Mr. LESINSKI. The reason the small business saves a little more is because it is a question of the cost of delivery.

Mr. KING. I do not know whether or not you were here, Congressman, at the time I pointed out that even if a retailer were engaged in the wholesale business, and 50 percent of his business were wholesale, that is, he was selling for resale, and 50 percent of his business was retail, nevertheless 80 percent of his cost of operation would be charged to the retail end of the business, and 80 percent of his profits would be derived from the rental end, so even if you have a yard whose business is split 50-50, even if you assume you had certain retail sales in there, or certain wholesale sales, nevertheless, the yard is characteristically, functionally, and historically a retail yard. That is where the cost of operation goes, because he has to service a retail sale. If he sells to a builder he still has to service the builder the same as he services an individual customer.

The testimony is that if 25 percent is nonretail, not wholesale, and if it is in quantities over and above the amount you would normally sell to an individual customer, say, $10, $20, or $30, worth, it is nonretail.

Assume I would sell you $20 worth, and let us assume that is the normal quantity sold to private individuals for household and private consumption, that is probably a retail sale, but if I turn around and sell the builder on the same terms, does that make it a wholesale That is the position of the Administrator.

Mr. IRVING. I did not suggest that I was going to make any ruling sale, just because it was over and above the quantity I sold you. Mr. KING. I am merely trying to point out what the Administrator has told us. He has told the retailers they are not retailers, and he has told the hardware-if you sell most of your commodities to paintters, carpenters, and so forth, you are selling to them not for their own personal use, but in a business enterprise. They are engaged in making money on the product, and therefore it is nonretail. Could you tell me, if I go in and buy five saws because I am going to be a carpenter, that that is over and above the amount sold to individual consumers, and therefore it is not a retail sale, when I buy it from a retail-hardware store?

Mr. IRVING. I would not in that case. When you sell to a painter he usually adds to the cost of the paint when he puts it on your house. Mr. KING. But the retail hardware sells the paint to the painter and just because he sells more to the painter than he normally sells

to a customer for household and private consumption, it is nonretail. It is still a retail sale by a retail establishment, but the Administrator says it is not, it is nonretail.

Mr. FORSYTHE. Have the courts upheld the Administrator's decision?

Mr. KING. The courts have upheld the Administrator's interpretation upon the insistence and philosophy advanced by the Administrator. It came up here last year, and he indicated the courts had gone too far, yet the language of the courts was taken from the language of the Administrator.

Mr. FORSYTHE. The courts have agreed with him, then?

Mr. KING. Yes; but he said the courts had gone too far, last year. Mr. GWINN. What does that do to you?

Mr. KING. We do not know. The Census asked us if we were retail, and told us that agencies of the Government say we are not retail. It was the Wage and Hour Division which told them we were not retail, because Wage and Hour did not want us classified as retail in the

census.

Mr. WERDEL. Is it not true, in answer to what it does to you under those circumstances, that if you have operated for 4 years thinking you were a retail store, and then they make the finding that you are not, then retroactively you suffer penalties?

Mr. KING. That is correct.

Mr. WERDEL. Which means that the higher you paid in wages to your employees, if you were not on time and a half for overtime, the more you paid them the worse you would be hit, is that not correct? Mr. KING. That is absolutely correct.

Mr. LESINSKI. Mr. Werdel, at that point let me say we all pay time and a half after 40 hours.

Mr. KING. Yours is a metropolitan yard?

Mr. LESINSKI. Yes; and we all pay time and a half.

Mr. KING. Not all the rural yards do.

Mr. WERDEL. The point I am making, Mr. Chairman, is out in our country we may have men who pay $2 an hour, or $2.50 an hour in industries where they thought they were out of the act, but they were working men 48 hours, and sometimes 60 hours, and paying them a terrific salary. If they discovered that they were mistaken, and the Administrator found them under the act, then the more they paid them, as a result of the hourly penalty provision, the wose they were hurt, men who were going ahead and doing it in good faith.

Mr. LESINSKI. That is the reason I believe the Congress should spell out actually the intent of Congress.

Mr. WERDEL. That is right.

Mr. LESINSKI. And I am still repeating the intent of Congress was to break it down to 40 hours. That was to spread the work, and those who did not want to spread the work were to pay time and a half for overtime, and double time on Sunday; that was the penalty, and that is the only reason I know. I have sat for hours on this, for years, and that is the only reason why it was done, and that is the way the contracts are made with the unions; that is the way we make our

contracts.

Mr. SMITH. Mr. Lesinski, you are talking about a metropolitan area. Now thousands and thousands of small businesses in this country do not know whether they are under this act, and the Ad

ministrator has constantly and gradually put them under the act, so they may wake up and find they have to go back and pay the penalties about which Mr. Werdel is talking.

Mr. LESINSKI. As I say, when we sit down in executive session let us spell out what the intent of Congress is.

Mr. GWINN. Mr. Chairman,suppose you used the word "retail" in the ordinarily accepted sense that Congressmen think retail means, I would certainly agree with the witness as to what I think retailing means, but by what resort has Congress to manufacture words that the Administrator may not interpret otherwise?

Mr. LESINSKI. The only way you can spell out retail is consumption within the interstate territory of a particular State.

Mr. KING. That is what Congress did. They said any employee of any retail establishment, employee of any retail establishment where 51 percent or more of the products sold were intrastate were exempt from (6) and (7).

Mr. LESINSKI. You will have to have a certain percentage, I can see that, because a packing-machine company may come in and say, "We want a couple of 6 by 6's," and you sell those 6 by 6's, but you do not know what they are going to do with them, but you find out they ship them to New York or San Francisco, and that would be interstate business.

Mr. KING. It would affect them, but it would not be interstate from your standpoint. The most you can say is that it will have a direct or indirect effect on it. That is the most you could possibly draw from it.

In order to understand the significance of this statement it is essential to realize that a dollar sales standard is in one sense an arbitrary yardstick which from a percentage standpoint does not reflect a true comparison of the retail and wholesale functions and characteristics of an establishment. Consider, for example the borderline case of an establishment having 50 percent of its dollar sales at retail and 50 percent at wholesale, or so-called nonretail. By reason of the greater pay roll and operating expenses of retail operations, such an establishment in a real and actual sense is from 75 to 80 percent retail and only about 25 percent wholesale. Although an establishment meets only the bare 50 percent retail dollar sales standard, at least 75 percent of the man-hours of its employees are in retail activities; more than 75 percent of the services performed are retail; at least 75 percent of the investment in the enterprise is devoted to the retail phase of the business; more than 75 percent of the stocks on hand will ultimately be sold at retail; and more than 75 percent of the activities of the establishment as a whole are retail.

For example, consider the illustration of a retail lumber dealer having an annual sales volume of $100,000. Assume that under the Division's definitions $50,000 of this amount represents retail sales and $50,000 represents wholesale sales. Assume also that there are eight employees. The time of at least six and probably seven of his employees will be engaged in retail work. More than 75 percent of the time the establishment is open to the public it will be servicing retail customers. From 95 to 98 percent of the transactions will be retail transactions. By reason of the prevalence of direct shipment sales in wholesale transactions, much more than 75 percent of the

materials carried in stock will be sold at retail. At least 75 percent of operating costs will be incurred in connection with retail activities. Also by reason of the direct shipments, much more than 75 percent of his investment will be dedicated to retail operations. Such a dealer is known in the community, in the trade, and by administrative agencies as a retail operator.

Innumerable attempts have been made to define "retail sale" but no definition has been found which could be applied to the various situations existing in the many types of retail establishments. It is for this reason that we have attempted a new approach to the whole problem. In conclusion, I want to emphasize that the proposal which we are offering does not remove from the coverage of the act employees which the sponsors of the legislation intended to cover, but merely clarifies the exemption which all the sponsors of the original legislation thought was perfectly clear.

(The appendix submitted by Mr. King is as follows:)

APPENDIX TO STATEMENT OF JOSEPH T. KING-LEGISLATIVE HISTORY RELATIVE TO THE RETAIL EXEMPTION

In enacting the Fair Labor Standards Act of 1938 Congress provided: "SEC. 13. (a) The provisions of sections 6 and 7 shall not apply with respect to (1) any employee employed in a bona fide executive, administrative, professional, or local retailing capacity, or in the capacity of outside salesman (as such terms are defined and delimited by regulations of the Administrator); or (2) any employee engaged in any retail or service establishment the greater part of whose selling or servicing is in intrastate commerce; *." (Italics supplied.)

* **

Sections 6 and 7 are the minimum-wage and maximum-hour provisions of the act. The original Senate bill contained no specific exemptions such as are now contained in section 13, yet the Attorney General in testifying before the joint hearings on the bill stated that

"It was not intended by this bill to apply generally to retailers or to apply the the service trades, such as the filling-station attendant, and the pants presser, and small business generally.

"Practically, the situation in which the local merchant might be affected would be if he were moving his goods in the course of delivery across the State line to a substantial extent so that he were engaging in interstate commerce; but generally speaking, the policy of the bill is not to include the service trades and small businesses and the retailing enterprises."

During the course of the debate Senator Black, who handled the bill on the Senate floor, explained that the committee had eliminated in the beginning any idea of attempting to regulate wages and hours of the various service employments throughout the country and went on to explain:

"That is done for two reasons. In the first place, the bill rests squarely upon the interstate-commerce clause of the Constitution. In the second place, I believe it was the prevailing sentiment of the committee, if not the unanimous sentiment of the committee, that businesses of a purely local type which serve a particular local community, and which do not send their products into the streams of interstate commerce, can be better regulated by the laws of the communities and of the States in which the business units operate." (Congressional Record, vol. 81, p. 7648).

The original Senate committee report said:

"The bill carefully excludes from its scope business in the several States that is of a purely local nature. It applies only to the industrial and business activities of the Nation insofar as they utilize the channels of interstate commerce, or seriously and substantially burden or harass such commerce. It leaves to State and local communities their own responsibilities concerning those local services and other business trades that do not substantially influence the stream of interstate commerce. For example, the policy in this regard is such that it is not even intended to include in its scope those purely local and small business