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Watkins v. Hudson Coal Co.

decided: September 5, 1945.


Author: Goodrich

Before GOODRICH and McALLISTER, Circuit Judges, and GIBSON, District Judge.

GOODRICH, Circuit Judge.

This is a civil action based on the "Fair Labor Standards Act of 1938",*fn1 to recover unpaid overtime wages claimed under § 7(a)*fn2 and liquidated damages, reasonable attorney's fee and court costs claimed under § 16(b).*fn3 Defendant is the owner and operator of certain coal mines in Pennsylvania in and around which plaintiffs are employed. That these employees are within the Act is not disputed.

Thirty-eight employees filed complaint seeking recovery as indicated. Defendant coal company in answer to the complaint made application for stay of suit until arbitration had been had.Plaintiffs' reply to the application was that the contracts set out in defendant's answer and upon which defendant affirmatively relied were illegal and void as against public policy and contrary to the Act. The District Court ordered that trial be "stayed until arbitration has been had in accordance with the terms of the agreements * * *". This is the order appealed from. A brief has also been filed for the Administrator of the Wage and Hour Division, United States Department of Labor as amicus curiae. Certain matters of fact were stipulated by the parties,*fn4 which will be considered later in conjunction with the requirements of the Act. Our conclusion is that the matter should proceed to arbitration, but only in accordance with the rulings of law as hereinafter set out.

The events separate naturally into three distinct time periods, each of which centers upon a different problem under the Act. The first period extends from the effective date of the Act, October 24, 1938, until November 1, 1939, when an alleged formula method for overtime was announced. The second period extends from November 1, 1939, until May 1, 1941, when the Union-Operators Agreement of that day went into effect. The third period covers time subsequent to May 1, 1941.

1. First Period, October 24, 1938 to November 1, 1939.

During this first period some of the plaintiffs were paid straight hourly rates and others straight monthly salaries. The defendant coal company admits that neither group of employees were paid any time and one-half overtime wages before November 1, 1939, but contends that the overtime due for the period was later paid by means of an "accord and satisfaction". This conclusion is disputed by plaintiffs on the ground that whatever was done by employees was a mere "waiver" and ineffective to change their rights under the Act.

Since plaintiffs were employed during the period under contention and since they were not paid the time and one-half rate provided in the Act for weekday hours over forty-four, it is perfectly clear that prima facie there is indicated on behalf of such employees a claim for the pay that they were entitled to under the Act, together with liquidated damages and attorney's fee. But, says the company, we settled all that controversy by the agreement of May, 1941, made between the union and the company with the union as the authorized bargaining agent for these employee-plaintiffs. We settled it by the provision in the contract that "The wage adjustments provided herein for employees customarily working forty-two hours a week, or more, constitute full settlement and satisfaction of all their claims, if any, for overtime against any signatory operator arising out of employment prior to May 1, 1941.*fn5

What is the effect of this clause in the agreement? It is now authoritatively settled that a waiver by an employee, even by a release under seal, of his rights against an employer under the Act is not effective to bar him from subsequent assertion of those rights. Brooklyn Savings Bank v. O'Neil, and its companion cases, 65 S. Ct. 895, 900, decide this, as do the flock of well considered cases in the District Courts and Circuit Courts of Appeal.*fn6 But in the Brooklyn Savings Bank decision the Court indicated that other considerations might apply if the sum paid by an employer to an employee was the "result of the settlement of a bona fide dispute * * * with respect to coverage or amount." The inference is that if there were, between employer and employee, a dispute either as to whether an employee was covered by the Act or, if so how much he had coming to him by reasons of the provision of the Act, settlement between the two parties of their dispute may, under proper circumstances, be upheld.

But we do not see how the facts of this case, at any rate on the state of the record now before us, bring the claim here involved within the exception mentioned by the Supreme Court as legally permissible. The identity of these employees is established through their lawsuit. We do not understand that the hours or terms upon which they worked prior to May, 1941, is subject to serious dispute. That their employment is covered by the Act is conceded. The amount which in May, 1941, was due them under the Act may be mathematically calculated by simple arithmetic once the hours are separated into regular and overtime hours.*fn7 We have then no settlement of a dispute with respect to coverage or amount involved here. We have, instead, the question of whether a purported settlement can be effected by a modification upward of the wage scale formerly existing. In other words, the company, to meet its obligation incurred by reason of its failure to pay the employees, says that in the future it will pay its men so much. That, it says, may be stipulated as a settlement of claims under the Act which have accrued to the employee. We do not think this is compliance with the Act. The history of the discussions concerning it and the judicial interpretation of the intent to the Act have been developed for us by the Supreme Court and brought into highlight by various dissenting opinions. We think that the change in wage scale is not a settlement for amounts admitted due under the Act prior to the adoption of the new scale and that that case is like the waiver case which the Supreme Court has declared not valid settlement under the statute.

The soundness of this conclusion is demonstrated, we think, by a little further analysis of the considerations which might bear on the differences between a waiver and the settlement under bona fide dispute mentioned by the Supreme Court. The company urges the increased payments under wage adjustments and the advantage of having these adjustments permanently incorporated in the wage scale as the equivalent of the payment which complies with the Act. It must be remembered, however, that the right of time and one-half for overtime, plus liquidated damages for failing to get it, is an individual right of the employee, not a criminal sanction nor even a general right given to the employees' bargaining unit.Unless an individual employee remained in the company's employ for long enough after the adoption of this increased wage scale to be paid whatever he had coming under the Act before the wage scale went into effect, he has not been compensated as the Act requires. Furthermore, we do not know, nor see how it could be demonstrated, how much of the increased wage scale was for payment of compensation due under the Act and how much of it may have resulted from economic pressure by the bargaining agent or how much of it came naturally on a rising wage scale market. The contested clause states that the wage adjustments apply to "all claims, if any, for overtime". We think the very nature of the language used shows that the inclusion of the overtime claims was but part, perhaps only a nominal part, of the bargaining by which the new wage scale was determined. Our conclusion is that the terms of the new wage scale is not a settlement sufficient under the Act in the light of the Supreme Court decisions above cited.

2. Second Period, November 1, 1939, to May 1, 1941.

The second period running from November 1, 1939, to May 1, 1941, involves the interpretation of a resolution of the Board of Conciliation of September 5, 1939, providing:*fn8 "(1) In compliance with the basic hour and rate provision of the Fair Labor Standards Act of 1938, which provides for a maximum of forty hours per week in October, 1940, plus punitive rates for time in excess thereof, it is agreed that the forty hours per week shall be the basis for a formula, which will produce earnings that shall be the same as earnings of such employees for equal time worked;". It is readily apparent that this clause gives rise to two problems: First, whether the formula described was actually instituted, and, second, whether if instituted it was valid under the Act. If the formula was not actually applied to determine wages then obviously its legality is irrelevant. If it was applied then its legality turns upon precisely the same considerations as the central question of the third period, and would better be considered in conjunction with that question.

The central question of the second period, that is, whether a formula was really adopted, can be answered only by considering what was paid and how it was paid. The language of the clause itself is not at all revealing. The words "forty hours per week shall be the basis for a formula" producing equal earnings for equal time worked indicates nothing beyond an intent expressed on the part of the Conciliation Board to adopt a formula which intent might be imputed to the parties on principles of agency.*fn9 Our problem is, however, not with intent but with realization of intent. As the District Court pointed out, the effect of the resolution and the entire series of agreements which all provided for action by the Arbitration Board, "was to authorize each employer in the industry to adopt any formula which would comply with the Act * * *. There is no doubt that * * * a formula * * * could be worked out." The coal company used the same reasoning to go one step further and say "Id certum est quod certum reddi potesti." But it is one thing to say that a formula was authorized, even let us say intended, and quite a bit more to conclude that it was actually applied.

The defendant urges that "the Board of Conciliation by the resolution of September 5, 1939 sought to provide a general formula * * * leaving the mere mathematics of determining each individual rate to bookkeepers." But the "mere mathematics" of bookkeeping, far from substantiating the view that a formula was in operation, does exactly the opposite. It indicates ...

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