The opinion of the court was delivered by: MADDEN
This is an action commenced in January, 1947, by 103 plaintiffs to recover alleged unpaid overtime compensation, liquidated damages and attorneys' fees pursuant to the Fair Labor Standards Act of 1938, 29 U.S.C.A. § 201 et seq. Subsequent to the institution of suit, but prior to trial, Congress amended the Act by the Portal-to-Portal Act of 1947, 29 U.S.C.A. § 251 et seq.
The case was called for trial February 14, 1949, and at that time the court permitted plaintiffs' amendment of the complaint to come within the provisions of the Portal-to-Portal Act. With the Court finding no element of surprise presented by such amendments, it proceeded with the trial. The facts briefly stated are as follows:
The defendants, The Canister Company (a partnership) and The Canister Company, Inc. (a corporation), now by stipulation assuming responsibility, were manufacturing goods for interstate commerce. During the years in question they put into effect a so called 'attendance bonus' to be paid to employees in the machine shop at certain rates for their hours in attendance at work during each word week.
The facts surrounding the situation are as follows. Defendants were engaged in essential work during the war period, 1942, 1943, and 1944. One seeking employment would go to the employment office of the defendants and there by interviewed and if thought to be desirable would be sent to the foreman or head of the particular department where again he would be interviewed by that individual and the head of the department would determine the rate of pay according to applicant's qualifications and classification. The head of the department would then give applicant a card showing his hiring and other data and instruct applicant to return to employment department. Upon return to the employment department applicant would be hired in accordance with the findings of the head of the department and then the provisions of the attendance bonus plan would be explained to the new worker; that if he worked continuously for the defendant companies he would, at the end of six months, receive a bonus based at the rate of either 5 cents or 10 cents per hour for each and every hour spent in attendance at work for the company in some productive capacity; if he left prior to the six month period he would receive nothing.
During the time involved there was in force a labor contract existing between the defendant companies and the bargaining agent for the employees, which among other things, concerning the bonus, provided as follows:
'The attendance bonus now in force of five (5 cents) cents an hour for apprentices regularly employed in the machine shop, and ten (10 cents) cents an hour for all employees of the Employer regularly employed in the machine shop, exclusive of supervisory employees or clerical workers and apprentices, shall remain in effect during the term of this agreement, subject to the terms and conditions under which such bonus was granted by the Employer to the employees; namely, such bonus shall not become earned and payable to the employee until he has been in the employ of the Employer Company for six consecutive months when he will be paid in a lump sum the bonus earned during such six consecutive months' period, and will continue for each succeeding period of six consecutive months that he remains in the employ of the Employer Company while the bonus remains in effect. Any employee, upon ceasing to be employed by the Employer Company, automatically forfeits any right of claim for bonus for that portion of the consecutive six months' period which he has served and has not completed.
'Subject to the term of this agreement, the Employer Company retains the unqualified right to discontinue the bonus whenever it sees fit.
This labor agreement was renewed June 9, 1942, and the new contract concerning this question provided as follows: 'Article IX- Attendance Bonus. The bonus to encourage regular attendance and reduce labor turnover is not compensation but an added gratuity. The Employer retains the unqualified right to discontinue it at any time after the expiration date of this agreement, in case of automatic renewal. It shall be payable in a lump sum after each period of six (6) months of employment while the bonus remains in effect after the execution and ratification of this agreement, and for the duration of its term only, and not automatically renewable. Apprentices shall receive a bonus of twelve and one-half (12 1/2 cents) cents an hour and mechanics shall receive seventeen and one-half (17 1/2 cents) cents an hour as an attendance bonus. In line with the policy heretofore established, this does not include laborers, clerical and supervisory employees. Employees joining the armed forces of the United States shall be paid their accumulated bonuses on leaving. In the case of death, the accumulated bonuses shall be paid to the widow of the deceased employee, or his estate.'
The labor contract of June 9, 1942, was renewed on November 26, 1943, and concerning this question provided as follows: 'Section 13: Attendance Bonus. The attendance bonus in the Machinery Division for all hourly-paid-regular-production employees, apprentices and women learners, now in effect, shall remain in effect for the duration of this agreement; women learners' bonus to be the same as that of apprentices.'
When the bonus was paid to the employee no deductions were made by the companies for social security, unemployment compensation or withholding tax upon the theory that it was a gift voluntarily paid by the companies. However, each week with his pay check an employee would receive a slip of paper (Exhibits P. 7, P. 8, D. 1, and D. 2) which read as follows:
(Not Computed on the Basis of Measured Work Performed)
Subject to conditions which were made clear ...