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Landaas v. Canister Co.

filed.: April 26, 1951.


Author: Goodrich

Before BIGGS, Chief Judge and MARIS and GOODRICH, Circuit Judges.

GOODRICH, Circuit Judge.

This case involves suit for unpaid overtime compensation provided by the Fair Labor Standards Act of 1938. 29 U.S.C.A. ยงยง 201-219. The court below allowed the claimants the compensation claimed, denied liquidated damages and interest and awarded attorneys' fees. D.C.N.J. 1950, 91 F.Supp. 620. Both sides appeal. There are five questions in the case.

(a) The first and most important question is whether the employees are entitled to overtime rates on hours over forty each week applied to what was called an "attendance bonus." This depends upon whether the "attendance bonus" is to be treated as part of the "regular rate" of pay in computing compensation for overtime under the statute.*fn1 The suing employees claim they were not paid the overtime to which they were entitled from March 1, 1941, to June 9, 1944.

Here are the facts: The employer*fn2 was engaged in some important work for the Navy. It desired to reduce absenteeism and labor turnover. When a man applied for work he was interviewed by those in charge of the technical department where he sought employment. If hired he was sent back to the personnel office for various details. The attendance bonus was then explained to him. By virtue of the attendance bonus the employee was entitled to so much extra pay for every hour he worked, but he received nothing if he quit before the end of a six months' period.*fn3 On each payday the employee was given a slip of paper showing how much attendance bonus he had accumulated in the six months' period then in progress. At the end of the six months" period the bonus checks were separately distributed by an officer of the company who gave them to the employees personally. During the years in question the payment of this attendance bonus was provided for in the contract made between the company and the bargaining union. The terms of the 1941 contract speak of "the attendance bonus now in force" so that its payment was evidently a matter of earlier custom on the part of the employer. The wording and the rates with regard to the per hour payment varied with the different contracts, but for the years in question nothing turns on that.

There was also inserted in each contract these two paragraphs:

"Subject to the terms of this agreement, the Employer Company retains the unqualified right to discontinue the bonus whenever it sees fit.

"It is understood by all parties that the bonus shall not be considered as added compensation, but will be paid merely as a gratuity to aid in decreasing labor turnover and to further good feeling between the Employer Company and its employees."

Now we get down to the main question. There is no dispute between employees and company with regard to the hourly wages paid them or the allowance for overtime on those wages. The only question we have here is whether this provision for attendance bonus was part of an employee's regular rate of pay under Section 7 of the statute.*fn4 If it was, he is entitled to have time and a half on the per hour provision for attendance bonus for the hours over forty he worked each week. If not, the company has paid him everything it owes him.

We think on this question that the plaintiffs are right and their employer is wrong. It is true that the bonus in question was not the result of increased productivity on the part of the worker. But it was the result of something which the company felt important enough to pay its good money for. That something was continuous service by the workers. It was an item which the company and the union bargained about and provision for bonus payment was put into the union contracts. Regardless of that, we think on simple principles of contract, the offer of attendance bonus was made to each employee after he was hired.It was in effect: "If you will be our employee for at least six months we will pay you so much extra for every hour you work." The employee accepted the offer by remaining employed during that period, thus giving up his privilege to quit at any time. We think under elementary principles of contract law there was an offer and acceptance which comprised an enforceable agreement to recover the amount of attendance bonus money thus earned.

What is said above takes care of the point made by the employer that certain employees were not in the bargaining union and, therefoer, not covered by the contract. In the view we take of the matter there was an individual contract with each employee and whether he was also covered by the union contract does not matter.

Was the bonus a part of the "regular" rate of pay? If "regular" is a matter of time, the fact that the interval between paydays was six months rather than one week or one month is not sufficient to deprive the payment of the element of regularity.The rotation of the seasons is a regular matter even though each one comes but once a year. If "regular" in this connection means "constituted in accordance with usage or contract" what we have said above already covers it.

Argument for the employer makes much of the paragraphs in the successive union contracts to the effect that the attendance bonus is purely a gratuity. It argues that contracts between the parties should be respected, especially when made between a strong collective bargaining union and an employer with no evidence of overreaching on the part of either.

There are two answers to this argument. One is that it is by no means easy to contract one's self out of the provisions of the Fair Labor Standards Act. Brooklyn Savings Bank v. O'Neil, 1945, 324 U.S. 697, 65 S. Ct. 895, 89 L. Ed. 1296. The second answer is that if in fact this is a payment which has become a matter of contract between the parties the performance becomes a matter of right, no matter whether the parties call the arrangement a gratuity, give it a ...

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