Endicott Johnson Corp. v. Perkins

317 U.S. 501, 63 S. Ct. 339, 87 L. Ed. 424, 1943 U.S. LEXIS 1114

• Court: Supreme Court of the United States
• Decided: March 1, 1943
• Docket: 142
• Status: Published

Opinions

Mr. Justice Jackson

delivered the opinion of the Court.

This case concerns the validity of a subpoena issued by the Secretary of Labor in administrative proceedings against the petitioner under the Walsh-Healey Public Contracts Act.¹ The petitioner successfully resisted the Secretary’s petition for enforcement in the District Court,² whose judgment was in turn reversed by the Circuit Court of Appeals for the Second Circuit.³ We granted certiorari because of the importance of the questions in the enforcement of the Act, and because of probable conflict with a holding of the Circuit Court of Appeals for the Sixth Circuit.⁴

The Walsh-Healey Act requires that contracts with the Government for the “manufacture or furnishing of materials, supplies, articles, and equipment in any amount exceeding $10,000” shall represent and stipulate, inter alia, for the payment of “not less than the minimum wages as determined by the Secretary of Labor” (§ 1 (b)), and that “no person employed by the contractor in the manufacture or furnishing of the materials, supplies, articles, or equipment used in the performance of the contract shall be permitted to work in excess of eight hours in any one day or in excess of forty hours in any one week” (§1 (c)); but provides that the Secretary may allow exemptions from the minimum wage provisions, and permit increases in the stipulated maximum hours on payment of wages at “not less than one and one-half times the basic hourly rate received by any employee affected.” (§ 6.)

The Act provides for liquidated damages for violations of required stipulations in the contract (§ 2); and, further, that “unless the Secretary of Labor otherwise recommends” no government contract shall be awarded to the firm or subsidiaries of the firm which he finds to have defaulted in its obligation under the Act “until three years have elapsed from the date the Secretary of Labor determines such breach to have occurred.” (§ 3.)

The Secretary is directed “to administer the provisions of this Act” and empowered to “make investigations and findings as herein provided, and prosecute any inquiry necessary to his functions.” (§ 4.) And that he may the better and the more fairly discharge his functions, he is authorized to hold hearings “on complaint of a breach or violation of any representation or stipulation” and “to issue orders requiring the attendance and testimony of witnesses and the production of evidence under oath. . . . In case of contumacy, failure, or refusal of any person to obey such an order,” the District Court of the United States “shall have jurisdiction to issue to such person an order requiring such person to appear before him or representative designated by him, to produce evidence if, as, and when so ordered, and to give testimony relating to the matter under investigation or in question; and any failure to obey such order of the court may be punished by said court as a contempt thereof.” The Secretary is directed to make “findings of fact after notice and hearing, which findings shall be conclusive upon all agencies of the United States, and if supported by the preponderance of the evidence, shall be conclusive in any court of the United States; and the Secretary of Labor . . . shall have the power, and is hereby authorized, to make such decisions, based upon findings of fact, as are deemed to be necessary to enforce the provisions of this Act.” (§ 5.)

Pursuant to her authority under the Act, the Secretary in 1937 defined by rulings the coverage of the Act. She provided, inter alia, that “employees engaged in or connected with the manufacture, fabrication, assembling, handling, supervision, or shipment of materials, supplies, articles, or equipment used in the performance of the contract” might be employed overtime, at “one and one-half times the basic hourly rate or piece rate received by the employee.”⁵ Stipulations as to minimum wages were made to “apply only to purchases or contracts relating to such industries as have been the subject of a determination by the Secretary of Labor.”⁶ Thereafter, and on December 21, 1937, she made a determination of minimum wages to be paid employees “engaged in the performance of contracts ... for the manufacture or supply of men’s welt shoes.” On September 29, 1939, and after the completion of the contracts involved in this case, the Secretary issued rulings specifically dealing with “integrated establishments.” ⁷

From the pleadings in the District Court and admitted statements in affidavits filed, there appear the following facts:

Between October 26, 1936, and June 8, 1938, petitioner was awarded several contracts for boots, shoes, gymnasium shoes and arctic overshoes. Each was for an amount in excess of $10,000, and each contract included representations and stipulations in accordance with the Act and the Secretary’s rulings thereunder set out above. Bids for and awards of the contracts designated the places of manufacture, and manufacture elsewhere was forbidden.⁸ In the plants so specified, notices required by the contract were posted,⁹ and there the petitioner admitted an obligation and apparently intended to comply with the Act and contract. The violations claimed in those plants are minor, if any; petitioner offered to adjust any violation found there and it has willingly furnished complete records and information as to those plants and those employed in them. But there ended, the petitioner claims, both the investigatory power of the Secretary and its obligation to make its records available.

The Secretary did not agree, and instituted an administrative proceeding against petitioner, charging violation of the stipulations in the contract by virtue of payments by petitioner of less than the minimum wages determined by her on December 21,1937, for the “manufacture or supply of men’s welt shoes,” and of failure to make required additional payments for overtime work, in other and physically separate plants owned and operated by the petitioner. In those plants, it manufactured parts such as counters and rubber heels, tanned leather for uppers and soles, and made cartons for packaging shoes for the Government, as well as for its civilian customers. The subpoena in question issued in this proceeding called for records chiefly relating to payrolls in such plants, and as to them the petitioner refused to comply.

To obtain the compliance to the subpoena which petitioner refused, the Secretary had resort to the District Court as provided by § 5, alleging the foregoing facts and that “following an investigation by representatives of the Department of Labor, and it having appeared to the plaintiff upon the basis of such investigation that defendant” had violated these stipulations of the contracts, she commenced such proceeding; and that “plaintiff has reason to believe, and said amended (administrative) complaint alleges, that the persons employed” and alleged to have been underpaid “in its Calfskin Tannery, Upper Leather Tannery,- Sole Leather Tannery, Paracord Factory, Sole Cuting Department (Johnson City), Sole Cutting Department (Endicott), Counter Department (Johnson City), and Carton Department (Johnson City) were employed by it in performance of the contracts specified,” and that such allegations were denied by the answer in the administrative proceedings.

The Corporation pleaded to the District Court its ownership and management of the plants in question and that the rubber heels and soles, the counters, cartons, and all except a portion of the leather soles “used in the manufacture” of the government footwear, “were manufactured” in its several separate plants or departments. It also set forth in full its answer in the administrative proceeding and reasons why it considered “arbitrary, artificial, unreasonable, discriminatory, and capricious” the ruling of the Secretary that the Act and contract applied to the plants other than those specifically named in the contracts. It denied that the payroll and similar records sought as to such plants were relevant to the determination of any matter confided to the Secretary’s determination.

The District Court denied the Secretary’s motion on the pleadings and accompanying affidavits for an enforcement order, overruled her contention that it was for her to decide this issue in the administrative proceeding, and set the case down for trial oh the question of whether the Act and contracts under the circumstances covered the separate plants.

We think that the admitted facts left no doubt that under the statute determination of that issue was primarily the duty of the Secretary.

The Act directs the Secretary to administer its provisions. It is not an Act of general applicability to industry. It applies only to contractors who voluntarily enter into competition to obtain government business on terms of which they are fairly forewarned by inclusion in the contract. Its purpose is to use the leverage of the Government’s immense purchasing power to raise labor standards.

Congress submitted the administration of the Act to the judgment of the Secretary of Labor, not to the judgment . of the courts.¹⁰ One of her principal functions is the conclusive determination of questions of fact for the guidance of procurement officers in withholding awards of government contracts to those she finds to be violators for three years from the date of the breach.

The matter which the Secretary was investigating and was authorized to investigate was an alleged violation of this Act and these contracts. Her scope would include determining what employees these contracts and the Act covered. It would also include whether the payments to them were lower than the scale fixed pursuant to the Act. She could not perform her full statutory duty until she examined underpayments wherever the coverage extended, because underpayment is an indispensable, albeit not the only, element of proof of violation. It is the only basis on which she can compute liquidated damage as she is required to do, and it is necessary to find the date of the last underpayment to fix the beginning of the three-year period of disqualification for further contracts. Thus the payrolls are clearly related to the violation. Indeed, the underpayment is itself the violation under investigation.

Of course another indispensable element of violation is that the underpaid employee be included within the benefits of the Act and contracts. This, too, was a matter under investigation in the administrative proceeding. But because she sought evidence of underpayment before she made a decision on the question of coverage and alleged that she “had reason to believe” the employees in question were covered, the District Court refused to order its production, tried the issue of coverage itself, and decided it against the Secretary. This ruling would require the Secretary, in order to get evidence of violation, either to allege she had decided the issue of coverage before the hearing or to sever the issues for separate hearing and decision. The former would be of dubious propriety, and the latter of doubtful practicality. The Secretary is given no power to investigate mere coverage, as such, or to make findings thereon except as incident to trial of the issue of violation. No doubt she would have discretion to take up the issues of coverage for separate and earlier trial if she saw fit. Or, in a case such as the one revealed by the pleadings in this one, she might find it advisable to begin by examining the payroll, for if there were no underpayments found, the issue of coverage would be academic. On the admitted facts of the case, the District Court had no authority to control her procedure or to condition enforcement of her subpoenas upon her first reaching and announcing a decision on some of the issues in her administrative proceeding.

Nor was the District Court authorized to decide the question of coverage itself. The evidence sought by the subpoena was not plainly incompetent or irrelevant to any lawful purpose of the Secretary in the discharge of her duties under the Act, and it was the duty of the District Court to order its production for the Secretary’s consideration. The Secretary may take the same view of the evidence that the District Court did, or she may not. The consequence of the action of the District Court was to disable the Secretary from rendering a complete decision on the alleged violation as Congress had directed her to do, and that decision was stated by the Act to be conclusive as to matters of fact for purposes of the award of government contracts. Congress sought to have the procurement officers advised by the experience and discretion of the Secretary rather than of the District Court. To perform her function she must draw inferences and make findings from the same conflicting materials that the District Court considered in anticipating and foreclosing her conclusions.

The petitioner has advanced many matters that are entitled to hearing and consideration in its defense against the administrative complaint, but they are not of a kind that can be accepted as a defense against the subpoena.¹¹

The subpoena power delegated by the statute as here exercised is so clearly within the limits of Congressional authority that it is not necessary to discuss the constitutional questions urged by the petitioner, and on the record before us the cases on which it relies¹² are inapplicable and do not require consideration.

Affirmed.

1 49 Stat. 2036; 41 U. S. C. § 35-15.

The proceedings were instituted against both petitioners, the Endicott Johnson Corporation and its secretary, and both participated in the subsequent litigation. For convenience we refer to both as “the petitioner.”

2 37 F. Supp. 604 and 40 F. Supp. 254.

3 128 F. 2d 208.

4 General Tobacco & Grocery Co. v. Fleming, 125 F. 2d 596.

5 Rulings and Interpretations under the Walsh-Healey Public Contracts Act, No. 1, § 4 (2) (a).

6 Ibid. § 4 (1).

7 Rulings and Interpretations No. 2, providing in § 1 (2):

“When a contractor to whom a contract subject to the Act is awarded operates an integrated establishment which manufactures or produces materials or supplies that are incorporated into or otherwise used in the manufacture or supply of the materials, supplies, articles, or equipment called for by the contract, the Act is applicable to those departments which are engaged in the manufacture or production of the materials or supplies to be so incorporated into or used in the manufacture or processing of the ultimate product to be delivered to the Government as well as to the employees engaged in the manufacture or processing of that ultimate product. For example: The processing of the leather and rubber for the shoes supplied under Government contracts subject to the Act is within the purview of the Act and Regulations, and compliance therewith is essential."

8 The bid stated:

“Bidders must state in space provided below names and locations of the factories where manufacture of the item bid upon will be performed. The performing of any of the work contracted for in any place other than that named in the bid is prohibited unless the same is specifically approved in advance by the Contracting Officer. If more than one place of manufacture is named, the quantity to be manufactured in each place must be given.”

A typical statement in response is:

Names and locations of factories: Quantities

“George F. Tabernacle” Factory (item 1)........ 133,524 pairs

East side of Washington Street (item 2)......... 182,256 pairs

(South of corner Susquehanna Street), Binghamton, N. Y., (total items 1 and 2)............ 315,780 pairs

A typical notice of award stated:

For 133,524 pairs Shoes, Service; Special Type “B” with Full Middle sole and Rubber Heel; 182,256 pairs Shoes, Service, Special Type “B,” with Corded Rubber Sole and Uncorded Rubber Heel.

To be manufactured at or supplied from Geo. F. Tabernacle, (Name and location of plants)

Binghamton, N. Y.

9 Article 18 (g).

10 Cf. Perkins v. Lukens Steel Co., 310 U. S. 113, and cases there cited.

11 These relate to: the meaning of the contract and the Act as implemented by administrative rulings in existence at the time of the making and performance of the contract; the question of possible retroactive effect of Rulings and Regulations No. 2, supra, note 7; the nature of petitioner’s business organization; and practices of procurement, manufacture, storage, consumption and distribution obtaining at petitioner’s plants.

12 Boyd v. United States, 116 U. S. 616; Interstate Commerce Commission v. Brimson, 154 U. S. 447; Harriman v. Interstate Commerce Commission, 211 U. S. 407; Ellis v. Interstate Commerce Commission, 237 U. S. 434; Federal Trade Commisdon v. American Tobacco Co., 264 U. S. 298.