Addison v. Huron Stevedoring Corp. Aaron v. Bay Ridge Operating Co., Inc

204 F.2d 88, 1953 U.S. App. LEXIS 3808

• Court: Court of Appeals for the Second Circuit
• Decided: March 20, 1953
• Docket: 11-12, Dockets 22276, 22277
• Status: Published

Opinions

SWAN, Chief Judge.

These two actions brought under the Fair Labor Standards Act of 1938, 29 U.S. C.A. § 216(b), involve the claims of longshoremen for unpaid overtime compensation, liquidated damages, attorney’s fees and costs, because of the alleged failure of the defendants to pay overtime compensation in accordance with section 7(a) of the Act, 29 U.S.C.A. § 207(a). The period of employment involved is from October 15, 1943 to September 30, 1945.¹ The actions were commenced on October 4, 1945 and the subsequent history of this protracted litigation, which has already once gone to the Supreme Court, is well stated in Judge Leibell’s careful and elaborate opinion.² He also made very detailed findings of fact, familiarity with which will be assumed. Ilis decision awarded small recoveries to four plaintiffs in the Huron action and to two in the Bay Ridge action, and dismissed on the merits the claims of the others.³ All twenty-three plaintiffs have appealed, those who had a recovery contending that the sums awarded them were too small.

The plaintiffs were employed under a collective bargaining contract between their employers and a longshoremen’s union which provided “straight time hourly rates” for work done within prescribed hours and “overtime hourly rates” for work done outside the straight time hours, with no differential for work in excess of 40 hours per week. The longshoremen worked a varying and irregular number of hours throughout a given workweek, and the same man’s workweek might consist of work done partly at “straight time hourly rates” and partly at “overtime hourly rates.” The problem of determining the “regular rate” of pay upon which the excess statutory compensation required by section 7(a) of the Fair Labor Standards Act of 1938 is based, was settled by the Supreme Court in June 1948 in the Bay Ridge case.⁴ It was there held that what the collective bargaining contract called “overtime hourly rates” was really a “shift differential”; and that the “regular rate” was to be found by dividing the weekly compensation by the hours worked, unless the compensation paid contains some amount that represents an “overtime premium” which was defined as “extra pay for work because of previous work for a specified number of hours in the workweek or workday” (italics added) ;5 in that event any overtime premium paid may be credited against the obligation to pay statutory excess compensation. The trial now before us for review was had under the mandate of the Supreme Court permitting the District Court to consider any defense which the employers may have under the Portal to Portal Act and to allow any amendments to the complaint or answer or any further evidence that the court may consider just. During the course of the trial defenses based on further amendment of the Fair Labor Standards Act were allowed to be pleaded.

Judge Leibell sustained defenses under sections 9 and 11 of the Portal Act, 29 U.S.C.A. §§ 258, 260, and under the 1949 amendments of the Fair Labor Standards Act, namely, P.L. 177 and P.L. 393 of the 81st Congress, 1st session, which appear as 29 U.S.C.A. § 207(d)(5), (d)(6), (d)(7), and (g). This resulted, as already stated, in dismissal of most of the claims which were tried.

Part I of the appellants’ brief is devoted to an attack upon the constitutionality of the statutes creating these defenses. This court has already sustained the constitutionality of the Portal Act,⁶ and the appellants do not ask us to reconsider those decisions but make their point merely to preserve it because the Supreme Court has not yet expressly ruled upon it. In considering the attack upon P.L. 177 and P.L. 393 it will suffice for present purposes to confine attention to 29 U.S.C.A. § 207(d) (7). This in effect provides that there shall be excluded from the “regular rate” at which an employee is employed “extra compensation provided by a premium rate” paid pursuant to a collective bargaining agreement for work outside the hours established in good faith as the “basic” workday or workweek (not exceeding 8 hours or 40 hours respectively) “where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek.” The appellants’ challenge to this provision is based lipón the theory (1) that it was a denial of due process of law to deprive them of their “vested right” to overtime computed in accordance with the Supreme Court’s ruling in the Bay Ridge case, and (2) that after the Supreme Court had so decided Congress could not overrule its judgment by declaring in effect that the rights so adjudicated the Act had not given. With respect to point (2) we, agree that Congress was incompetent to declare that the Supreme Court had misconstrued the Act or that the Act did not confer the rights which the Court declared that it did. But the amendments should not be interpreted as attempting to do that. What they undertook to do was to deprive, the longshoremen of those rights which the Act, as construed by the Supreme Court, had given. If that was beyond Congressional competence, it was not because the Congress encroached •upon the constitutional independence of the Court but because the Fifth Amendment forbade such action. Hence the appellants’ .challenge of constitutionality must stand or fall on the first objection, the denial of due process. The same arguments now advanced with respect to the Fifth Amendment were rejected by this court in upholding the constitutionality of the Portal Act.⁷ With respect to P.L. 177 and P.L. 393 the writer of the present opinion is .content to rest on what was there said.⁸

The appellants further contend that the amendatory statutes cannot be constitutionally applied to deprive counsel of reasonable fees for'services already performed and money expended in reliance upon the Act prior to amendment. This matter is discussed in Judge Leibell’s opinion, 96 F.Supp. 142 at page 177. He rejected the contention for reasons with which we agree. Furthermore the judgments under review specifically reserve “to plaintiffs’ counsel the right to apply for an allowance of counsel fees after the com.pletion of any appeals which may be taken in order to review the judgment in the higher courts.” Hence the claim that counsel have already been unconstitutionally deprived of reasonable fees appears to be premature.

Part II of the appellants’ brief attacks the findings and conclusions of the district court in sustaining defenses under sections 9 and 11 of the Portal Act. Pages 154 to 166 of 96 F.Supp. deal with the section 9 defense. Under section 9, 29 U.S.C.A. § 258, the question is whether the defendants’ failure to pay overtime in exact conformity with section 7a of the Act “was in good faith in conformity with and" in reliance on any administrative regulation, order, ruling, approval, or interpretation, of any agency of the United States * * Judge Leibell held that section 9 was a bar to the plaintiffs’ actions except with respect to overtime claims for certain weeks in which a plaintiff was employed as header, gangwayman or assistant foreman and as Such received a “skill differential” of 5 cents or 15 cents per hour.⁹ In discussing the meaning of “good faith,” 96 F.Supp. at page 155, he expressed the view that it requires more than honest belief and must meet an “objective test,” that is, the employer must act “as a reasonably prudent man would have acted under the same circumstances.” Although the question may not be of importance in the case at bar since the trial court found that the defendants’ reliance upon agency rulings and interpretations was in fact reasonable as well as honest, we feel constrained to express disagreement with the view that “good faith” must meet an objective standard of reasonableness. If the interpretation which an employer says he put upon ati agency ruling is unreasonable, this may indeed cast doubt upon the honesty of his belief in the interpretation he asserts, hut wc think it is not otherwise relevant. The “good faith” of the statute requires, we think, only an honest intention to ascertain what the Fair Labor Standards Act requires and to act in accordance with it. This is confirmed by comparing the language of section 11, 29 U.S.C.A. § 260, with that of section 9. Section 11 requires the employer’s “act or omission” to have been taken not only “in good faith” but also with “reasonable grounds for believing that his act of omission was not a violation of the Fair Labor Standards Act”. Obviously in section 11 the objective standard of reasonableness is a requirement additional to that of “good faith.” It would be unwarranted to construe “good faith” in section 9 to have a meaning different from the saijig phrase in section 11. Furthermore, we think it clear that Congress must have intended to adopt this meaning. Section 9 presupposes that different governmental agencies may have made ambiguous or even conflicting rulings, interpretations, etc., of the Act. From such rulings the employer must choose the one he honestly believes to, be correct, must conform with it and must act in reliance upon it. If he has done this his past conduct is to be excused, even if the ruling he has relied upon is later determined by judicial authority to have been erroneous. For future conduct, however, he may rely only on some written regulation, ruling, etc., of the Administrator of the Wage and Hour Division of the Department of Labor.¹⁰ The appellants argue that there could not be good faith reliance on a ruling of another agency, such as the War Shipping Administration, after the employers knew that the agency primarily charged with enforcement of the Act, the Wages and Hours Division, had expressed a different view, as it did in the Walling letter of October 15, 1943. We cannot agree. Section 9 authorizes good faith reliance on the ruling of “any” agency.

Turning from the legal interpretation of section 9 to the application of it to the facts, as found by Judge Leibcll in great detail, we see no occasion to add to his opinion. It will suffice to say that we have examined the findings and do not think the appellants have shown any of them to be clearly erroneous. We agree with the conclusion that the defense was proven, except as to claims involving the skill differentials.

The other Portal Act defense which was sustained relates to liquidated damages. Section 16(b) of the Fair Labor Standards Act provides for recovery of liquidated damages in an amount equal to the unpaid wages owed pursuant to sections 6 and 7. Consequently, unless the plaintiffs recover for overtime under section 7, they are entitled to no liquidated damages under section 16(b), and do not need the defense provided by section 11 of the Portal Act, except as to the small claims involving “skill differentials” and “cargo differentials.” Judge Leibell discusses the section 11 defense and his reasons for awarding no liquidated damages at pages 166 to 168 of 96 F.Supp. For the reasons there stated we think his discretion was properly exercised.

Part III of the appellants’ brief deals with several miscellaneous contentions, chief of which is the assertion that the trial court erred in allowing the defendants to credit contract “overtime” payments after eight daily or forty weekly “straight time” hours against the obligation to pay the statutory overtime compensation. This ruling is expressed in number V of the Conclusions of Law and is limited to plaintiffs who performed work as a gangwayman, header or assistant foreman, thus involving the skill differentials.¹¹ The appellees’ brief points out, correctly we think, that this ruling is immaterial except as to contract overtime rates of less than 150% of contract straight time rates, because 150% overtime rates fall under section 7(d) 6, 7 (d)7 and 7(g) of P.L. 393, 29 U.S.C.A. § 207(d)(6), 207(d)(7) and 207(g). Contract overtime rates of less than 150% fall outside sections 7(d) 6 and 7(d) 7 but may come under section 7(d) 5 if they were paid because the employee had worked in excess of eight hours in a day or forty hours in a workweek; and, if they do fall under section 7(d) 5, they are creditable under section 7(g).¹² Judge Leibell stated in his opinion, at page 172 of 96 F.Supp.:

“If .an overtime premium of less than full time and a'half was paid to a plaintiff because the work was performed at a time outside the clock pattern of the basic workday as fixed by the employment contract but not because the employee had previously worked eight hours in that day, the premium would not be a true overtime payment under the Supreme Court ruling in this case. But where an employee, who had already worked eight contract straight time hours in a day, thereafter received for additional hours in the day a pre-, mium payment slightly less than time and one half the contract straight time rate, the inference is warranted that the premium rate actually paid during the additional hours in that day was. paid because of the hours previously worked, and the Supreme Court’s ruling that it is true overtime would therefore be applicable.”

With the first sentence of the above quotation we are in complete accord. The basis for “the inference” stated in the second sentence is not apparent to us. Nor is it, we think, consistent with what the Supreme Court held on the prior appeal. That opinion repeatedly emphasized that what the collective bargaining contract called “overtime hourly rates” was a shift differential paid to the employees who worked during less desirable hours than those described in the “straight time hourly rates.” ¹³ Consequently we agree with the appellants’ contention that the “inference” that contract overtime hourly rates were paid "because of the hours previously worked” (italics added) is not justified. But it by no means follows, in our opinion, that the trial judge erred in excluding the “contract overtime” premiums in computing the regular rate of pay where these premiums did not amount to fifty percent of the straight time rate because of the presence of a skill differential. For, while the amended provisions in §' 7(d) (5) do not authorize this exclusion, it is our opinion that § 9 of-the Portal to Portal Act does. Suppose one of the plaintiffs worked ten hours on a given day as an assistant foreman, receiving a straight time rate for eight hours and contract overtime for two; for mathematical convenience let it he assumed that the straight time hourly rate was $1.00, plus 15 cents, the skill differential, and that the contract overtime hourly rate was $1.50, plus the fifteen cents. Since the additional fifteen cents an hour received for two hours was not true overtime pay — paid because of work previously done in the day¹⁴ — in the absence of any exculpatory legislation, his regular rate of pay for that day would have been $12.50 (8 X $1.15 plus 2 X $1.65) divided by 10, or $1.25 an hour; hence he would be entitled to an additional $1.25 (2 X 621/4 cents) for overtime work. But we have already held that -where no skill differential was concerned, the 50 cent contract overtime premium met the statutory overtime requirement by virtue of § 9 of the Portal to Portal Act. Where the employer, without reliance on any administrative decision, has failed to pay a part of the overtime required by the Fair Labor Standards Act, it may be argued that he could not have in good faith supposed himself to be complying with the Act, and that the Portal Act’s exoneration should therefore be denied him absolutely. We do not believe this to have been the intention of Congress; to so interpret the law would not only deny credit for the premium, but would increase the employer’s liability by reason of a payment which in the absence of a skill differential would satisfy the statute. We therefore find that in the computation of the regular rate in the example given above, the 50 cent contract-overtime premium should be excluded; thus the regular rate would be 8 X $1.15 plus 2 X ($1.65-50) divided by 10, or $1.15. Thus the employer would be liable for the difference between 8 X $1.15 plus 2 X $1,721/4, or $12.65, and the $12.50 already paid. If we correctly understand Judge Leibell’s opinion, the credit he allowed for contract overtime payments results in a computation conforming to this rule.

In Conclusion XIV(B) the trial court ruled: “If the amount recoverable by any plaintiff for any week is less than $1.00 the doctrine of de minimis non curat lex is applicable.” In holding this doctrine applicable the trial judge relied, at page 179 of 96 F.Supp., upon Anderson v. Mr. Clemens Pottery Co., 328 U.S. 680, 692, 66 S.Ct. 1187, 1195, 90 L.Ed. 1515, where Mr. Justice Murphy said, “When the matter in issue [walking time after punching the time clocks] concerns only a few seconds or minutes of work beyond the scheduled working hours, such trifles may be disregarded.” We do not think this justifies a disregard in the case at bar of all awards of less than a dollar for any one week. The impediment to prompt decision of the action is in computing what is the amount due a plaintiff for each of his workweeks. Once that has been done, all that remains is to add up all the awards. To- disregard workweeks for which less than a dollar is due will produce capricious and unfair results. Thus A must be paid the $50 owed him for one week’s work, but B may be refused payment of a like sum due him, because it is made up of awards spread equally over 51 or more weeks. In Landaas v. Canister Co., 3 Cir., 188 F.2d 768, 771, the court declined to apply the de minimis rule to- claims asserted under the Fair Labor Standards Act. We agree with that decision.

The appellants next claim error in the trial court’s refusal to include in its judgment provisions for amounts awarded them in the earlier trial before Judge Rifkind, including costs and disbursements, from which the employers took no appeal. But the appellants appealed, the judgment was reversed and the Supreme Court’s mandate allowed amendment of the pleadings and the taking of further proof. We believe that this denuded the first judgment of any effect except in so far as Judge Leibell might adopt such findings of Judge Rifkind as he thought right. Moreover, the amendments to section 16(b), 29 U.S.C.A. § 216, have removed the mandatory requirement that plaintiffs who recover judgment shall be awarded in addition a reasonable attorney’s ■ fee “and costs of the action.”

Finally, the appellants urge that they should be awarded interest on whatever recovery is allowed. They recognize that the Third Circuit has ruled to the contrary in the Landaas case, 188 F.2d 768, 772. We agree with the View there expressed.¹⁵

We find the judgments correct except as to the de minimis point. Because of that error the causes must be remanded for.re-computation of the awards affected by the application of the de minimis rule; in other respects the judgments are affirmed.

Judgments reversed in part and causes remanded for further proceedings in conformity with this opinion.

2 . Addison v. Huron Stevedoring Corp., 96 F.Supp. 142.

3 . Although several hundred longshoremen are named as plaintiffs in the two actions, the claims of only 13 plaintiffs in the Huron ease and 10 in the Bay Ridge case have progressed to trial and judgment; the claims of the others await the outcome of these appeals.

4 . Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 68 S.Ct. 1186, 92 L.Ed. 1502.

5 . 334 U.S. at page 465, 68 S.Ct. at page 1197. See also 334 U.S. 466, 68 S.Ct. 1197, where Mr. Justice Reed in the majority opinion says: “Under the definition, a mere higher rate paid as a job differential or as a shift differential, or for Sunday or holiday work, is not an overtime premium. * * * The higher rate must be paid because of the hours previously worked for the extra pay to be an overtime premium.”

6 . Battaglia v. General Motors Corp., 2 Cir., 169 F.2d 254, certiorari denied 335 U.S. 887, 69 S.Ct. 236, 93 L.Ed. 425; Darr v. Mutual Life Ins. Co., 2 Cir., 169 F.2d 262, certiorari denied 335 U.S. 871, 69 S.Ct. 166, 93 L.Ed. 415.

7 . See note 6, supra.

8 . See Moss v. Hawaiian Dredging Co., 9 Cir., 187 F.2d 442, sustaining the constitutionality of P.L. 177 and P.L. 393.

9 . As to claims for weeks involving ■ the skill differential, section 9 was held not to be a bar because the employer failed to include in the computation of overtime for that week an amount equal to one and a half times the skill differential, and there was no administrative ruling by any agency of the United States approving this practice. Since the defendants have not appealed and ■ the appellants have not questioned this ruling we do not consider it.

10 . Section 10 of the Portal Act, 20 U.S. O.A. § 259.

11 . “In any week during the period , in suit, wherein any plaintiff performed work as a gangwayman, header or assistant foreman after eight hours of straight time work in a day, or after forty hours of work in a week, and received from the defendants premium payments in , an amount stated in the collective bargaining agreement for work done in excess of, eight straight time hours in a day, or in excess of forty hours in a week, such premium payments were made" because of work previously done and should be excluded from the computation of the plaintiffs’ regular rate, and are creditable toward overtime compensation payable pursuant to Section 7 of the Fair Labor Standards Act of 1938, as amended [T. 29 U.S.C. § 207].”

12 . Section 7(d) 5 of P.L. 393, 29 U.S.C.A. § 207(d) 5 provides that there shall be excluded from “the ‘regular rate’ at which an employee is employed”—

“extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because such hours are hours worked in excess of eight in a day or forty in a workweek or in excess of the employee’s normal working hours or regular working hours, as the case may be”.

Section 7(g) reads as follows:.

“(g). Extra compensation paid as. described in paragraphs (5)-(7) of subsection (d) shall be creditable toward overtime compensation payable pursuant to this section.”

13 . For example, 334 U.S. at page 475, 68 S.Ct. at page 1202: “Under the contract we are examining, the respondents’ work in overtime hours was performed without any' relation as to whether they had or had not worked before. Under our view of § 7(a)’s requirements their high pay was not because they had previously worked but because of the disagreeable hours they were called to labor or because the contracting parties wished to compress the regular working days into the straight time hours as much as possible.”-

14 . Tho amount received by a longshoreman who had worked from 6 A. M. to 4 P. M. would be the samo as that received by one who had worked from 8 A. M. to 6 P. M., even though the actual overtime hours worked were compensated at different rates.

15 . Cf. Greenberg v. Arsenal Bldg. Corp., 2 Cir., 144 F.2d 292, 294, reversed as to interest in Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 715, 65 S.Ct. 895, 89 L.Ed. 1296.