(a) General statement. (1) If an employee of a producer of goods for commerce would not, while performing particular work, be ``engaged in the production'' of such goods for purposes of the Act under the principles heretofore stated, an employee of an independent employer performing the same work on behalf of the producer would not be so engaged. Conversely, as shown in the paragraphs following, the fact that employees doing particular work on behalf of such a producer are employed by an independent employer rather than by the producer will not take them outside the coverage of the Act if their work otherwise qualifies as the ``production'' of ``goods'' for ``commerce.''
(1) If an employee of a producer of goods for commerce would not, while performing particular work, be ``engaged in the production'' of such goods for purposes of the Act under the principles heretofore stated, an employee of an independent employer performing the same work on behalf of the producer would not be so engaged. Conversely, as shown in the paragraphs following, the fact that employees doing particular work on behalf of such a producer are employed by an independent employer rather than by the producer will not take them outside the coverage of the Act if their work otherwise qualifies as the ``production'' of ``goods'' for ``commerce.''
(2) Of course, in view of the Act's definition of ``goods'' as including ``any part or ingredient'' of goods (see Sec. 776.20 (a), (c)), employees of an independent employer providing other employers with materials or articles which become parts or ingredients of goods produced by such other employers for commerce are actually employed by a producer of goods for commerce and their coverage under the Act must be considered in the light of this fact. For example, an employee of such an independent employer who handles or in any manner works on the goods which become parts or ingredients of such other producer's goods is engaged in actual production of goods (parts of ingredients) for commerce, and the question of his coverage is determined by this fact without reference to whether his work is ``closely related'' and ``directly essential'' to the production by the other employer of the goods in which such parts or ingredients are incorporated. So also, if the employee is not engaged in the actual production of such parts or ingredients, his coverage will depend on whether as an employee of a producer of goods for commerce, his work is ``closely related'' and ``directly essential'' to the production of the parts or ingredients, rather than on the principles applicable in determining the coverage of employees of an independent employer who does not himself produce the goods for commerce. \94\---------------------------------------------------------------------------
\94\ Bracey v. Luray, 138 F. 2d 8 (C.A. 4); Walling v. Peoples Packing Co., 132 F. 2d 236 (C.A. 10), certiorari denied 318 U.S. 774; Mid-Continent Pipe Line Co. v. Hargrave, 129 F. 2d 655 (C.A. 10); Walling v. W. D. Haden Co., 153 F. 2d 196 (C.A. 5).---------------------------------------------------------------------------
(3) Where the work of an employee would be ``closely related'' and ``directly essential'' to the production of goods for commerce if he were employed by a producer of the goods, the mere fact that the employee is employed by an independent employer will not justify a different answer. \95\ This does not necessarily mean that such work in every case will remain ``closely related'' to production when performed by employees of an independent employer. It will, of course, be as ``directly essential'' to production in the one case as in the other. (See Sec. 776.17(c)). But in determining whether an employee's work is ``closely'' or only remotely related to the production of goods for commerce by an employer other than his own, the nature and purpose of the business in which he is employed and in the course of which he performs the work may sometimes become important.---------------------------------------------------------------------------
\95\ See Kirschbaum Co. v. Walling, 316 U.S. 517; Roland Electrical Co. v. Walling, 326 U.S. 657; Farmers Reservoir Co. v. McComb, 337 U.S. 755; H. Mgrs. St., 1949, p. 14. See also Sen. St., 1949 Cong. Rec., p. 15372. Such factors may prove decisive in particular situations where the employee's work, although ``directly essential'' to the production of goods by someone other than his employer, is not far from the borderline between those activities which are ``directly essential'' and those which are not. In such a situation, it may appear that his performance of the work is so much a part of an essentially local business carried on by his employer without any intent or purpose of aiding production of goods for commerce by others that the work, as thus performed, may not reasonably be considered ``closely related'' to such production. \96\ In other situations, however, where the degree to which the work is directly essential to production by the producer is greater the fact that the independent employer is engaged in a business having local aspects may not be sufficient to negate a close relationship between his employees' work and such production. \97\ And it seems clear that where the independent employer operates a business which, unlike that of the ordinary local merchant, is directed to providing producers with materials or services directly essential to the production of their goods for commerce, the activities of such a business may be found to be ``closely related'' to such production. \98\ In such event, all the employees of the independent employer whose work is part of his integrated effort to meet such needs of producers are covered as engaged in work closely related and directly essential to production of goods for commerce. \99\---------------------------------------------------------------------------
\96\ M. Mgrs. St., 1949, pp. 14, 15, 10 E. 40th St. Bldg. Co. v. Callus, 325 U.S. 578.
\97\ H. Mgrs. St., 1949, p. 14; Kirschbaum Co. v. Walling, 316 U.S. 517; Warren-Bradshaw Drilling Co. v. Hall, 317 U.S. 88.
\98\ See H. Mgrs. St., p. 14, and 10 E. 40th St. Bldg. Co. v. Callus, 325 U.S. 578.
\99\ Kirschbaum Co. v. Walling, 316 U.S. 517 (Stationary engineers and firemen, watchmen, elevator operators, electricians, carpenters, carpenters' helper, engaged in maintaining and servicing loft building for producers); Roland Electrical Co. v. Walling, 326 U.S. 657 (foremen, trouble shooters, mechanics, helpers, and office employees of company selling and servicing electric motors, generators, and equipment for commercial and industrial firms); Meeker Coop. Light & Power Assn. v. Phillips, 158 F. 2d 698 (C.A. 8) (outside employees and office employees of light and power company serving producers); Walling v. New Orleans Private Patrol Service, 57 F. Supp. 143 (E. D. La.) (guards, watchmen, and office employees of company providing patrol service for producers); Walling v. Thompson, 65 F. Supp. 686 (S.D. Cal.) (installation and service men, shopmen, bookkeeper, salesman, dispatcher of company supplying burglar alarm service to producers).
In H. Mgrs. St., 1949, p. 14 it is said, ``Employees engaged in such maintenance, custodial and clerical work will remain subject to the Act, notwithstanding they are employed by an independent employer performing such work on behalf of the manufacturer, mining company, or other producer for commerce. All such employees perform activities that are closely related and directly essential to the production of goods for commerce.'' ---------------------------------------------------------------------------
(b) Extent of coverage under ``closely related'' and ``directly essential'' clause illustrated. In paragraphs (b)(1) to (5) of this section, the principles discussed above are illustrated by reference to a number of typical situations in which goods or services are provided to producers of goods for commerce by the employees of independent employers. These examples are intended not only to answer questions as to coverage in the particular situations discussed, but to provide added guideposts for determining whether employees in other situations are doing work closely related and directly essential to such production.
(1) Many local merchants sell to local customers within the same State goods which do not become a part or ingredient (as to parts or ingredients, see Sec. 776.20(c)) of goods produced by any of such customers. Such a merchant may sell to his customers, including producers for commerce, such articles, for example, as paper towels, or record books, or paper clips, or filing cabinets, or automobiles and trucks, or paint, or hardware, not specially designed for use in the production of other goods. Where such a merchant's business is essentially local in nature, selling its goods to the usual miscellany of local customers without any particular intent or purpose of aiding production of other goods for commerce by such customers, the local merchant's employees are not doing work both ``closely related'' and ``directly essential'' to production, so as to bring them within the reach of the Act, merely ``because some of the customers * * * are producing goods for interstate [or foreign] commerce.'' \1\ Therefore, if they do not otherwise engage ``in commerce'' (see Sec. Sec. 776.8 to 776.13) or in the ``production'' of goods for commerce, they are not covered by the Act.---------------------------------------------------------------------------
\1\ H. Mgrs. St., 1949, pp. 14, 15. In such a situation, moreover, even where the work done by the employees is ``directly essential'' to such production by their employer's customers, it may not meet the ``closely related'' test. But the more directly essential to the production of goods for commerce such work is, the more likely it is that a close and immediate tie between it and such production exists which will be sufficient, notwithstanding the local aspect of the employer's business, to bring the employees within the coverage of the Act on the ground that their work is ``closely related'' as well as ``directly essential'' to production by the employer's ---------------------------------------------------------------------------customers. Such a close and immediate tie with production exists, for example, where the independent employer, through his employees, supplies producers of goods for commerce with things as directly essential to production as electric motors or machinery or machinery parts for use in producing the goods of a manufacturer, for mining operations, or for production of oil, or for other production operations or the power, water, or fuel required in such production operations, to mention a few typical examples. \2\ The fact that these needs of producers are supplied through the agency of businesses having certain local aspects cannot alter the obvious fact that the employees of such businesses who supply these needs are doing work both ``closely related'' and ``directly essential'' to production by the employer's customers. As the United States Supreme Court has stated: ``Such sales and services must be immediately available to * * * [the customers] or their production will stop.'' \3\---------------------------------------------------------------------------
\2\ See H. Mgrs. St., 1949, p. 14; Sen. St., 95 Cong. Rec., October 19, 1949, at 15372; Statement of the Chairman of the Committee on Education and Labor explaining the conference agreement to the House of Representatives, 1949 Cong. Rec., p. 15135; Roland Electrical Co. v. Walling, 326 U.S. 657; Reynolds v. Salt River Valley Water Users Assn., 143 F. 2d 863 (C.A. 9); Meeker Coop. Light & Power Assn. v. Phillips, 158 F. 2d 698 (C.A. 8); Walling v. Hammer, 64 F. Supp. 690 (W.D. Va.); Holland v. Amoskeag Machine Co., 44 F. Supp. 884 (D. N.H.); Princeton Mining Co. v. Veach, 63 N.E. 2d 306 (Ind. App.).
\3\ Roland Electrical Co. v. Walling, 326 U.S. 657, 664. It should be noted that employees of independent employers providing such essential goods and services to producers will not be removed from coverage because an unsegregated portion of their work is performed for customers other than producers of goods for commerce. For example, employees of public utilities, furnishing gas, electricity or water to firms within the State engaged in manufacturing, mining, or otherwise producing goods for commerce, are subject to the Act notwithstanding such gas, electricity or water is also furnished to consumers who do not produce goods for commerce. \4\---------------------------------------------------------------------------
\4\ Meeker Coop. Light & Power Assn. v. Phillips, 158 F. 2d 698 (C.A. 8); H. Mgrs. St., 1949, p. 14. For another illustration see H. Mgrs. St., 1949, p. 26, with reference to industrial laundries.---------------------------------------------------------------------------
(2) On similar principles, employees of independent employers providing to manufacturers, mining companies, or other producers such goods used in their production of goods for commerce as tools and dies, patterns, designs, or blueprints are engaged in work ``closely related'' as well as ``directly essential'' to the production of the goods for commerce; \5\ the same is true of employees of an independent employer engaged in such work as producing and supplying to a steel mill, sand meeting the mill's specifications for cast shed, core, and molding sands used in the production by the mill of steel for commerce. \6\ Another illustration of such covered work, according to managers of the bill in Congress, is that of employees of industrial laundry and linen supply companies serving the needs of customers engaged in manufacturing or mining goods for commerce. \7\---------------------------------------------------------------------------
\5\ H. Mgrs. St., 1949, p. 14; Sen. St., 1949 Cong. Rec., p. 15372.
\6\ Walling v. Amidon, 153 F. 2d 159 (C.A. 10); Sen. St., 95 Cong. Rec., October 19, 1949, at 15372.
\7\ H. Mgrs. St., 1949, p. 26; Sen. St., 95 Cong. Rec., October 19, 1949, at 15372. See also Koerner v. Associated Linen Laundry Suppliers, 270 App. Div. 986, 62 N.Y.S. 2d 774. On the other hand, the legislative history makes it clear that employees of a ``local architectural firm'' are not brought within the coverage of the Act by reason of the fact that their activities ``include the preparation of plans for the alteration of buildings within the State which are used to produce goods for interstate commerce.'' Such activities are not ``directly essential'' enough to the production of goods in the buildings to establish the required close relationship between their performance and such production when they are performed by employees of such a ``local'' firm. \8\ Of course, this result is even more apparent where the activities of the employees of such a ``local'' business may not be viewed as ``directly essential'' to production. It is clear, for example, that Congress did not believe ``employees of an independently owned and operated restaurant'' should be brought under the coverage of the Act because the restaurant is ``located in a factory.'' To establish coverage on ``production'' grounds, an employee must be ``shown to have a closer and more direct relationship to the producing * * * activity'' than this. \9\---------------------------------------------------------------------------
\8\ H. Mgrs. St., 1949, p. 15. See also McComb v. Turpin, 81 F. Supp. 86, 1948 (D. Md.).
\9\ H. Mgrs. St., 1949, p. 14. Cf. Bayer v. Courtemanche, 76 F. Supp. 193 (D. Conn.). See also Sec. 776.18(b).---------------------------------------------------------------------------
(3) Some further examples may help to clarify the line to be drawn in such cases. The work of employees constructing a dike to prevent the flooding of an oil field producing oil for commerce would clearly be work not only ``directly essential'' but also ``closely related'' to the production of the oil. However, employees of a materialman quarrying, processing, and transporting stone to the construction site for use in the dike would be doing work too far removed from production of the oil to be considered ``closely related'' thereto. \10\ Similarly, the sale of sawmill equipment to a producer of mine props which are in turn sold to mines within the same State producing coal for commerce is too remote from production of the coal to be considered ``closely related'' thereto, but production of the mine props, like the manufacture of tools, dies, or machinery for use in producing goods for commerce, has such a close and immediate tie with production of the goods for commerce that it meets the ``closely related'' (as well as the ``directly essential'') test. \11\---------------------------------------------------------------------------
\10\ See E. C. Schroeder Co. v. Clifton, 153 F. 2d 385 (C.A. 10) (opinion of Judge Phillips) and H. Mgrs. St., 1949, p. 15.
\11\ See Wailing v. Hamner, 64 F. Supp. 690 (W.D. Va.), and statement of the Chairman of the Committee on Education and Labor explaining the conference agreement to the House of Representatives, 1949 Cong. Rec., p. 15135.---------------------------------------------------------------------------
(4) A further illustration of the distinction between work that is, and work that is not, ``closely related'' to the production of goods for commerce may be found in situations involving activities which are directly essential to the production by farmers of farm products which are shipped in commerce. Employees of an employer furnishing to such farmers, within the same State, water for the irrigation of their crops, power for use in their agricultural production for commerce, or seed from which the crops grow, are engaged in work ``closely related'' as well as ``directly essential'' to the production of goods for commerce. \12\ On the other hand, it is apparent from the legislative history that Congress did not regard, as ``closely related'' to the production of farm products for commerce, the activities of employees in a local fertilizer plant producing fertilizer for use by farmers within the same State to improve the productivity of the land used in growing such products. \13\ Fertilizer is ordinarily thought to be assimilated by the soil rather than by the crop and, in the ordinary case, may be considered less directly essential to production of farm products than the water or seed, without which such production would not be possible. Probably the withdrawal from coverage of such employees (who were held ``necessary'' to production of goods for commerce under the Act prior to the 1949 amendments \14\) rests wholly or in part on the principles stated in paragraph (a)(3) of this section and paragraph (b)(1) of this section. Heretofore the Department has taken the position that producing or supplying feed for poultry and livestock to be used by farmers within the State in the production of poultry or cattle for commerce was covered. The case of Mitchell v. Garrard Mills \15\ has reached a contrary conclusion as to a local producer of such feed in a situation where all of the feed was sold to farmers and dealers for use exclusively within the State. For the time being, and until further clarification from the courts, the Divisions will not assert the position that coverage exists under the factual situation which existed in this case.---------------------------------------------------------------------------
\12\ See Farmers Reservoir Co. v. McComb, 337 U.S. 755; Reynolds v. Salt River Valley Water Users Assn., 143 F. 2d 863 (C.A. 9); Meeker Coop. Light & Power Assn. v. Phillips, 158 F. 2d 698 (C.A. 8).
Reference should be made to section 13 (a) (6) of the Act providing an exemption from the wage and hours provisions for employees employed in agriculture and for certain employees of nonprofit and sharecrop irrigation companies.
\13\ H. Mgrs. St. 1949, p. 15.
\14\ McComb v. Super-A Fertilizer Works, 165 F. 2d 824 (C.A. 1).
\15\ 241 F. 2d 249 (C.A. 6).---------------------------------------------------------------------------
(5) Managers of the legislation in Congress stated that all maintenance, custodial, and clerical employees of manufacturers, mining companies, and other producers of goods for commerce perform activities that are both ``closely related'' and ``directly essential'' to the production of goods for commerce, and that the same is true of employees of an independent employer performing such maintenance, custodial, and clerical work ``on behalf of'' such producers. Typical of the employees in this covered group are those repairing or maintaining the machinery or buildings used by the producer in his production of goods for commerce and employees of a watchman or guard or patrol or burglar alarm service protecting the producer's premises. \16\ On the other hand, the House managers of the bill made it clear that employees engaged in cleaning windows or cutting grass at the plant of a producer of goods for commerce were not intended to be included as employees doing work ``closely related'' to production on ``on behalf of'' the producer where they were employed by a ``local window-cleaning company'' or a ``local independent nursery concern,'' merely because the customers of the employer happen to include producers of goods for commerce. \17\ A similar view was expressed with respect to employees of a ``local exterminator service firm'' working wholly within the State exterminating pests in private homes, in a variety of local establishments, ``and also in buildings within the State used to produce goods for interstate commerce.'' \17\---------------------------------------------------------------------------
\16\ See H. Mgrs. St., 1949, p. 14; Sen. St. 1949 Cong. Rec. p. 15372; Kirschbaum Co. v. Walling, 316 U.S. 517; Roland Electrical Co. v. Walling, 326 U.S. 657; Walling v. Sondock, 132 F. 2d 77 (C.A. 5); Holland v. Amoskeag Machine Co., 44 F. Supp. 884 (D.N.H.).
\17\ H. Mgrs. St., 1949, page 15. [15 FR 2925, May 17, 1950, as amended at 22 FR 9692, Dec. 4, 1957] Sec. 776.20 ``Goods.''
(a) The statutory provision. An employee is covered by the wage and hours provisions of the Act if he is engaged in the ``production'' (as explained in Sec. Sec. 776.15 through 776.19) ``for commerce'' (as explained in Sec. 776.21) of anything defined as ``goods'' in section 3(i) of the Act. This definition is:
Goods means goods (including ships and marine equipment), wares, products, commodities, merchandise, or articles or subjects of commerce of any character, or any part or ingredient thereof, but does not include goods after their delivery into the actual physical possession of the ultimate consumer thereof other than a producer, manufacturer, or processor thereof.
(b) ``Articles or subjects of commerce of any character.'' It will be observed that ``goods'' as defined in the Act are not limited to commercial goods or articles of trade, or, indeed, to tangible property, but include ``articles or subjects of commerce of any character (emphasis supplied). \18\ It is well settled that things such as ``ideas, * * * orders, and intelligence'' are ``subjects of commerce.'' Telegraphic messages have, accordingly, been held to be ``goods'' within the meaning of the Act. \19\ Other articles or subjects of commerce which fall within the definition of ``goods'' include written materials such as newspapers, magazines, brochures, pamphlets, bulletins, and announcements; \20\ written reports, fiscal and other statements and accounts, correspondence, lawyers' briefs and other documents; \21\ advertising, motion picture, newspaper and radio copy, artwork and manuscripts for publication; \22\ sample books; \23\ letterheads, envelopes, shipping tags, labels, check books, blank books, book covers, advertising circulars and candy wrappers. \24\ Insurance policies are ``goods'' within the meaning of the Act; \25\ so are bonds, stocks, bills of exchange, bills of lading, checks, drafts, negotiable notes and other commercial paper. \26\ ``Goods'' includes gold; \27\ livestock; \28\ poultry and eggs; \29\ vessels; \30\ vehicles; \31\ aircraft; \32\ garments being laundered or rented; \33\ ice; \34\ containers, as, for example, cigar boxes or wrapping paper and packing materials for other goods shipped in commerce; \35\ electrical energy or power, gas, etc.; \36\ and by-products, \37\ to mention only a few illustrations of the articles or subjects of ``trade, commerce, transportation, transmission, or communication among the several States, or between any State and any place outside thereof'' which the Act refers to as ``goods.'' The Act's definitions do not, however, include as ``goods'' such things as dams, river improvements, highways and viaducts, or railroad lines. \38\---------------------------------------------------------------------------
\18\ As pointed out in Lenroot v. Western Union Tel. Co., 141 F. 2d 400 (C.A. 2), the legislative history shows that the definition was originally narrower, and that subjects of commerce were added by a Senate amendment.
\19\ Western Union Tel. Co. v. Lenroot 323 U.S. 490.
\20\ Mabee v. White Plains Pub. Co., 327 U.S. 178; Yunker v. Abbye Employment Agency, 32 N.Y.S. 2d 715; Berry v. 34 Irving Place Corp., 52 F. Supp. 875 (S.D. N.Y.); Ullo v. Smith, 62 F. Supp. 757, affirmed in 177 F. 2d 101 (C.A. 2); see also opinion of the four dissenting justices in 10 E. 40th St. Bldg. v. Callus, 325 U.S. at p. 586.
Waste paper collected for shipment in commerce is goods. See Fleming v. Schiff, 1 W.H. Cases 893 (D. Colo.), 15 Labor Cases (CCH) par. 60,864.
\21\ Phillips v. Meeker Coop. Light & Power Asso., 63 F. Supp. 733, affirmed in 158 F. 2d 698 (C.A. 8); Lofther v. First Nat. Bank of Chicago, 48 F. Supp. 692 (N.D. Ill.) See also Rausch v. Wolf, 72 F. Supp. 658 (N.D. Ill). There are other cases (e.g., Kelly v. Ford, Bacon & Davis, 162 F. 2d 555 (C.A. 3) and Bozant v. Bank of New York, 156 F. 2d 787 (C.A. 2) which suggest that such things are ``goods'' only when they are articles of trade. Although the Supreme Court has not settled the question, such a view appears contrary to the express statutory definitions of ``goods'' and ``commerce''.
\22\ Robert v. Henry Phipps Estate, 156 F. 2d 958 (C.A. 2); Baldwin v. Emigrant Industrial Sav. Bank, 150 F. 2d 524 (C.A. 2), certiorari denied 326 U.S. 757; Bittner v. Chicago Daily News Ptg. Co., 4 W.H. Cases 837 (N.D. Ill.), 29 Labor Cases (CCH) par. 62,479; Schinck v. 386 Fourth Ave. Corp., 49 N.Y.S. 2d 872.
\23\ Walling v. Higgins, 47 F. Supp. 856 (E.D. Pa.).
\24\ McAdams v. Connelly, 8 W.H. Cases 498 (W.D. Ark.), 16 Labor Cases (CCH) par. 64,963; Walling v. Lacy, 51 F. Supp. 1002 (D. Colo.); Tobin v. Grant 8 W.H. Cases 361 (N.D. Calif.). See also Walling v. Sieving, 5 W.H. Cases 1009 (N.D. Ill.), 11 Labor Cases (CCH) par. 63,098.
\25\ Darr v. Mutual Life Ins. Co., 169 F. 2d 262 (C.A. 2), certiorari denied 335 U.S. 871.
\26\ Bozant v. Bank of New York, 156 F. 2d 787 (C.A. 2).
\27\ Walling v. Haile Gold Mines, 136 F. 2d 102 (C.A. 4); Fox v. Summit King Mines, 143 F. 2d 926 (C.A. 9).
\28\ Walling v. Friend, 156 F. 2d 429 (C.A. 8).
\29\ Walling v. DeSoto Creamery & Produce Co., 51 F. Supp. 938 (D. Minn).
\30\ Slover v. Wathen, 140 F. 2d 258 (C.A. 4).
\31\ Hertz Drivurself Stations v. United States, 150 F. 2d 923 (C.A. 8).
\32\ Jackson v. Northwest Airlines, 75 F. Supp. 32 (D. Minn.).
\33\ Phillips v. Star Overall Dry Cleaning Laundry Co., 149 F. 2d 416 (C.A. 2).
\34\ Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4); Atlantic Co. v. Walling, 131 F. 2d 518 (C.A. 5).
\35\ Enterprise Box Co. v. Fleming, 125 F. 2d 897 (C.A. 5), certiorari denied, 316 U.S. 704; Fleming v. Schiff, 1 W.H. Cases 883 (D. Colo.), 5 Labor Cases (CCH) par. 60,864.
\36\ Walling v. Connecticut Co.; 62 F. Supp. 733 (D. Conn.), affirmed 154 F. 2d 552 (C.A. 2).
\37\ Walling v. Peoples Packing Co., 132 F. 2d 236 (C.A. 10), certiorari denied 318 U.S. 774.
\38\ Engebretsen v. Albrecht, 150 F. 2d 602 (C.A. 7); Kenny v. Wigton-Abbott Corp., 80 F. Supp. 489 (D. N.J.).---------------------------------------------------------------------------
(c) ``Any part or ingredient.'' Section 3(i) draws no distinction between goods and their ingredients and in fact defines goods to mean ``goods'' * * * or any part or ingredient thereof.'' The fact that goods are processed or changed in form by several employers before going into interstate or foreign commerce does not affect the character of the original product as ``goods'' produced for commerce. Thus, if a garment manufacturer sends goods to an independent contractor within the State to have them sewn, after which he further processes and ships them in interstate commerce, the division of the production functions between the two employees does not alter the fact that the employees of the independent contractor are actually producing (``working on'') the ``goods'' (parts or ingredients of goods) which enter the channels of commerce. \39\---------------------------------------------------------------------------
\39\ Schulte Co. v. Gangi, 328 U.S. 108. Similarly, if a manufacturer of buttons sells his products within the State to a manufacturer of shirts, who ships the shirts in interstate commerce, the employees of the button manufacturer would be engaged in the production of goods for commerce; or, if a lumber manufacturer sells his lumber locally to a furniture manufacturer who sells furniture in interstate commerce, the employees of the lumber manufacturer would likewise come within the scope of the Act. Any employee who is engaged in the ``production'' (as explained in Sec. 776.15) of any part or ingredient of goods produced for trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof is engaged in the production of ``goods'' for commerce within the meaning of the Act. \40\---------------------------------------------------------------------------
\40\ Roland Electrical Co. v. Walling, 326 U.S. 657; Bracy v. Luray, 138 F. 2d 8 (C.A. 4); Walling v. W. J. Haden Co., 153 F. 2d 196 (C.A. 5); Mid-Continent Pipe Line Co. v. Hargrave, 129 F. 2d 655 (C.A. 10); Boiling v. Allison, 4 W. H. Cases 500 (N.D. Okla.); Hanson v. Lagerstrom, 133 F. 2d 120 (C.A. 8); Walling v. Comet Carriers, 151 F. 2d 107 (C.A. 2); Walling v. Griffin Cartage Co., 62 F. Supp. 396, affirmed in 153 F. 2d 587 (C.A. 6); Walling v. Kerr, 47 F. Supp. 852 (E.D. Pa.).---------------------------------------------------------------------------
(d) Effect of the exclusionary clause. The exclusionary clause in the definition that excepts ``goods after their delivery into the actual physical possession of the ultimate consumer thereof other than a producer, manufacturer, or processor thereof,'' is intended to protect ultimate consumers other than producers, manufacturers, or processors of the goods in question \41\ from the ``hot goods'' provisions of section 15(a)(1) of the Act. \42\ Section 15(a)(1) makes it unlawful for any person ``to transport * * * (or * * * ship * * * in commerce * * * any goods'' produced in violation of the wage and hours standards established by the Act. (Exceptions are made subject to specified conditions for common carriers and for certain purchasers acting in good faith reliance on written statements of compliance. See footnote 53 to Sec. 776.15(a).) By defining ``goods'' in section 3(i) so as to exclude goods after their delivery into the actual physical possession of the ultimate consumer (other than a producer, manufacturer, or processor thereof) Congress made it clear that it did not intend to hold the ultimate consumer as a violator of section 15(a)(1) if he should transport ``hot goods'' across a State line. \43\ Thus, if a person purchases a pair of shoes for himself from a retail store \44\ and carries the shoes across a State line, the purchaser is not guilty of a violation of section 15(a)(1) if the shoes were produced in violation of the wage or hours provisions of the statute. But the fact that goods produced for commerce lose their character as ``goods'' after they come into the actual physical possession of an ultimate consumer who does not further process or work on them, does not affect their character as ``goods'' while they are still in the actual physical possession of the producer, manufacturer or processor who is handling or working on them with the intent or expectation that they will subsequently enter interstate or foreign commerce. \45\ Congress clearly did not intend to permit an employer to avoid the minimum wage and maximum hours standards of the Act by making delivery within the State into the actual physical possession of the ultimate consumer who transports or ships the goods outside of the State. Thus, employees engaged in building a boat for delivery to the purchaser at the boatyard are considered within the coverage of the Act if the employer, at the time the boat is being built, intends, hopes, or has reason to believe that the purchase will sail it outside the State. \46\---------------------------------------------------------------------------
\41\ Southern Advance Bag & Paper Co. v. United States, 183 F. 2d 449 (C.A. 5); Phillips v. Star Overall Dry Cleaning Laundry Co, 149 F. 2d 485 (C.A. 2), certiorari denied 327 U.S. 780.
\42\ Jackson v. Northwest Airlines, 70 F. Supp. 501.
\43\ Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4), certiorari denied 317 U.S. 634.
\44\ Note that the retail or service establishment exemption in section 13(a)(2) does not protect the retail store from a violation of the ``hot goods'' provision if it sells in interstate commerce goods produced in violation of section 6 or 7.
\45\ See cases cited above in footnotes 41, 42, 43, this section.
\46\ Walling v. Lowe, 5 W.H. Cases (S.D. Fla.), 10 Labor Cases (CCH) 63,033. See also Walling v. Armbruster, 51 F. Supp. 166 (W.D. Ark.); Joshua Hendy Corp. v. Mills, 169 F. 2d 898 (C.A. 9); St. Johns River Shipbuilding Co. v. Adams, 164 F. 2d 1012 S. (C.A. 5).--------------------------------------------------------------------------- Sec. 776.21 ``For'' commerce.
(a) General principles. As has been made clear previously, where ``goods'' (as defined in the Act) are produced ``for commerce,'' every employee engaged in the ``production'' (as explained in Sec. Sec. 776.15 through 776.19) of such goods (including any part or ingredient thereof) is within the general coverage of the wage and hours provisions of the Act. Goods are produced for ``commerce'' if they are produced for ``trade, commerce, transporation, transmission, or communication among the several States or between any State and any place outside thereof.'' \47\ Goods are produced ``for'' such commerce where the employer intends, hopes, expects, or has reason to believe that the goods or any unsegregated part of them will move (in the same or in an altered form or as a part or ingredient of other goods) in such interstate or foreign commerce. \48\ If such movement of the goods in commerce can be reasonably anticipated by the employer when his employees perform work defined in the Act as ``production'' of such goods, it makes no difference whether he himself, or a subsequent owner or possessor of the goods, put the goods in interstate or foreign commerce. \49\ The fact that goods do move in interstate or foreign commerce is strong evidence that the employer intended, hoped, expected, or had reason to believe that they would so move.---------------------------------------------------------------------------
\47\ Fair Labor Standards Act, section 3(b).
\48\ United States v. Darby, 312 U.S. 100; Warren-Bradshaw Drilling Co. v. Hall, 371 U.S. 88; Schulte Co. v. Gangi, 328 U.S. 108.
\49\ Schulte Co. v. Gangi, 328 U.S. 108; Warren-Bradshaw Drilling Co. v. Hall, 417 U.S. 88. See paragraph (d) of this section. Although it is generally well understood that goods are produced ``for'' commerce if they are produced for movement in commerce to points outside the State, questions have been raised as to whether work done on goods may constitute production ``for'' commerce even though the goods do not ultimately leave the State. As is explained more fully in the paragraphs following, there are certain situations in which this may be true, either under the principles above stated (see paragraph (c) of this section), or because it appears that the goods are produced ``for'' commerce in the sense that they are produced for use directly in the furtherance, within the particular State, of the actual movement to, from, or across such State or interstate or foreign commerce. (See paragraph (b) of this section).
(b) Goods produced for direct furtherance of interstate movement. (1) The Act's definition of ``commerce,'' as has been seen, describes a movement, among the several States or between any State and any outside place, of trade, commerce, transportation, transmission, or communication.'' Whenever goods are produced ``for'' such movement, such goods are produced ``for commerce,'' whether or not there is any expectation or reason to anticipate that the particular goods will leave the State. \50\---------------------------------------------------------------------------
\50\ Fleming v. Atlantic Co., 40 F. Supp. 654, affirmed in 131 F. 2d 518 (C.A. 5).---------------------------------------------------------------------------
(2) The courts have held that particular goods are produced ``for'' commerce when they are produced with a view to their use, whether within or without the State, in the direct furtherance of the movement of interstate or foreign commerce. Thus, it is well settled that ice is produced ``for'' commerce when it is produced for use by interstate rail or motor carriers in the refrigeration or cooling of the equipment in which the interstate traffic actually moves, even though the particular ice may melt before the equipment in which it is placed leaves the State. \51\ The goods (ice) produced for such use ``enter into the very means of transportation by which the burdens of traffic are borne.'' \52\ The same may be said of electrical energy produced and sold within a single State for such uses as lighting and operating signals on railroads and at airports to guide interstate traffic, lighting and operating radio stations transmitting programs interstate, and lighting and message transmission of telephone and telegraph companies. \53\ Similar principles would apply to the production of fuel or water for use in the operation of railroads with which interstate and foreign commerce is carried on; the production of radio or television scripts which provide the basis for programs transmitted interstate; the production of telephone and telegraph poles for use in the necessary repair, maintenance, or improvement of interstate communication systems; the production of crushed rock, ready-mixed concrete, cross-ties, concrete culvert pipe, bridge timbers, and similar items for use in the necessary repair, maintenance, or improvement of railroad roadbeds and bridges which serve as the instrumentalities over which interstate traffic moves.---------------------------------------------------------------------------
\51\ Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4), certiorari denied 317 U.S. 634; Atlantic Co. v. Walling, 131 F. 2d 518 (C.A. 5); Chapman v. Home Ice Co.; 136 F. 2d 353 (C.A. 6) certiorari denied 320 U.S. 761; Southern United Ice Co. v. Hendrix, 153 F. 2d 689 (C.A. 6); Hansen v. Salinas Valley Ice Co., 62 Cal. App. 357, 144 F. 2d 896.
\52\ Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4).
\53\ Lewis v. Florida Power & Light Co., 154 F. 2d 751 (C.A. 5); see also Walling v. Connecticut Co., 154 F. 2d 552 (C.A. 2). Similarly, in the case of highways, pipe lines, and waterways which serve as instrumentalities of interstate and foreign commerce, the production of goods for use in the direct furtherance of the movement of commerce thereon would be the production of goods ``for commerce.'' The production of materials \54\ for use in the necessary maintenance, repair, or improvement of the instrumentality so that the flow of commerce will not be impeded or impaired is an example of this. Thus, stone or ready-mixed concrete, crushed rock, sand, gravel, and similar materials for bridges or dams; like materials or bituminous aggregate or oil for road surfacing; concrete or galvanized pipe for road drainage; bridge planks and timbers; paving blocks; and other such materials may be produced ``for'' commerce even though they do not leave the State.---------------------------------------------------------------------------
\54\ Walling v. Staffen, 5 W.H. Cases 1002 (W.D. N.Y.), 11 Labor Cases (CCH) par. 63, 102; McCombs v. Carter, 8 W.H. Cases 498 (E.D. Va.), 16 Labor Cases (CCH) par. 64, 964. Contra, McComb v. Trimmer, 85 F. Supp. 565 (D. N.J.). Cf. Engebretson v. Albrecht, 150 F. 2d 602 (C.A. 7).---------------------------------------------------------------------------
(3) This does not, however, necessarily mean that the production of such materials within a State is always production ``for'' commerce when the materials are used in the same State for the maintenance, repair, or improvement of highways or other instrumentalities carrying interstate traffic. In determining whether the production is actually ``for'' commerce in a situation where there is no reason to believe that the goods will leave the State, a practical judgment is required. Some illustrations may be helpful. On the one hand, there are situations where there is little room for doubt that the goods are produced ``for'' commerce in the sense that the goods are intended for the direct furtherance of the movement of commerce over the instrumentalities of transportation and communication. The most obvious illustration is that of special-purpose goods such as cross-ties for railroads, telephone or telegraph poles, or concrete pipe designed for highway use. Another illustration is sand and gravel for highway repair or reconstruction which is produced from a borrow pit opened expressly for that purpose, or from the pits of an employer whose business operations are conducted wholly or in the substantial part with the intent or purpose of filling highway contracts. (The fact that a substantial portion of the employer's gross income is derived from supplying such materials for highway repair and reconstruction would be one indication that a substantial part of his business is directed to the purpose of meeting such needs of commerce.) On the other hand, there are situations where materials or other goods used in maintaining, repairing, or reconstructing instrumentalities of commerce are produced and supplied by local materialmen under circumstances which may require the conclusion that the goods are not produced ``for'' commerce. Thus, a materialman may be engaged in an essentially local business serving the usual miscellany of local customers, without any substantial part of such business being directed to meeting the needs of highway repair or reconstruction. If, on occasion, he happens to produce or supply some materials which are used within the State to meet such highway needs, and he does so as a mere incident of his essentially local business, the Administrator will not consider that his employees handling or working on such materials are producing goods ``for'' commerce. This is, rather, a typically local activity of the kind the Act was not intended to cover. The same may be said of the production of ice by an essentially local ice plant where the only basis of coverage is the delivery of ice for the water cooler in the community railroad station. The employees producing ice in the ice plant for local use would not by reason of this be covered as engaged in the production of goods ``for'' commerce. Other illustrations might be given but these should emphasize the essential distinction which must be kept in mind. Borderline cases will, of course, arise. In each such case the facts must be examined and a determination made as to whether or not the goods may fairly be viewed as produced ``for'' use in the direct furtherance of the movement of interstate or foreign commerce, and thus ``for'' commerce.
(c) Controlling effect of facts at time ``production'' occurs. (1) Whether employees are engaged in the production of goods ``for'' commerce depends upon circumstances as they exist at the time the goods are being produced, not upon some subsequent event. Thus, if a lumber manufacturer produces lumber to fill an out-of-State order, the employees working on the lumber are engaged in the production of goods for commerce and within the coverage of the Act's wage and hours provisions, even though the lumber does not ultimately leave the State because it is destroyed by fire before it can be shipped. Similarly, employees drilling for oil which the employer expects to leave the State either as crude oil or refined products are engaged in the production of goods for commerce while the drilling operations are going on and are entitled to be paid on that basis notwithstanding some of the wells drilled may eventually prove to be dry holes. \55\---------------------------------------------------------------------------
\55\ Culver v. Bell & Loffland, 146 F. 2d 29 (C.A. 9); see also Warren-Bradshaw Drilling Co. v. Hall, 317 U.S. 88.---------------------------------------------------------------------------
(2) On the other hand, if the lumber manufacturer first mentioned produces lumber to fill the order of a local contractor in the expectation that it will be used to build a schoolhouse within the State, the employees producing the lumber are not engaged in the production of goods ``for'' commerce and are not covered by the Act. This would remain true notwithstanding the contractor subsequently goes bankrupt and the lumber is sold to a purchaser who moves it to another State; the status of the employees for purposes of coverage cannot in this situation, any more than in the others, be retroactively changed by the subsequent event.
(d) Goods disposed of locally to persons who place them in commerce. It is important to remember that if, at the time when employees engage in activities which constitute ``production of goods'' within the meaning of the Act, their employer intends, hopes, expects, or has reason to believe that such goods will be taken or sent out of the State by a subsequent purchaser or other person into whose possession the goods will come, this is sufficient to establish that such employees are engaged in the production of such goods ``for'' commerce and covered by the Act. Whether the producer passes title to the goods to another within the State is immaterial. \56\ The goods are produced ``for'' commerce in such a situation whether they are purchased f.o.b. the factory and are taken out of the State by the purchaser, or whether they are sold within the State to a wholesaler or retailer or manufacturer or processor who in turn sells them, either in the same form or after further processing, in interstate or foreign commerce. The same is true where the goods worked on by the producer's employees are not owned by the producer and are returned, after the work is done, to the possession of the owner who takes or sends them out of the State. \57\ Similarly, employees are engaged in the production of goods ``for'' commerce when they are manufacturing, handling, working on, or otherwise engaging in the production of boxes, barrels, bagging, crates, bottles, or other containers, wrapping or packing material which their employer has reason to believe will be used to hold the goods of other producers which will be sent out of the State in such containers or wrappings. It makes no difference that such other producers are located in the same State and that the containers are sold and delivered to them there. \58\---------------------------------------------------------------------------
\56\ Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4). certiorari denied 317 U.S. 634; Bracey v. Luray, 138 F. 2d 8 (C.A. 4).
\57\ Schulte Co. v. Gangi, 328 U.S. 108; Warren-Bradshaw Drilling Co. v. Hall, 317 U.S. 88; Walling v. Kerr, 47 F. Supp. 852 (E.D. Pa.).
\58\ Enterprise Box Co. v. Fleming, 125 F. 2d 897 (C.A. 5), certiorari denied 316 U.S. 704; Dize v. Maddrix, 144 F. 2d 584 (C.A. 4), affirmed 324 U.S. 697; Walling v. Burch, 5 W. H. Cases 323 (S.D. Ga.); 9 Labor Cases (CCH) par. 62, 613; Fleming v. Schiff, 1 W.H. Cases 893 (D. Colo.), 5 Labor Cases (CCH) par. 60, 864.
It should be noted that where empty containers are purchased, loaded, or transported within a single State as a part of their movement, as empty containers, out of the State, an employee engaged in such purchasing, loading, or transporting operations is covered by the Act as engaged ``in commerce.'' Atlantic Co. v. Weaver, 150 F. 2d 843 (C.A. 4); Klotz v. Ippolito, 40 F. Supp. 422 (S.D. Tex.); Orange Crush Bottling Co. v. Tuggle, 70 Ga. App. 144, 27 S.E. 2d 769.---------------------------------------------------------------------------