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United States v. Unexcelled Chemical Corp.

decided.: April 29, 1952.

UNITED STATES
v.
UNEXCELLED CHEMICAL CORP.



Author: Staley

Before McLAUGHLIN, STALEY and HASTIE, Circuit Judges.

STALEY, Circuit Judge.

We are asked to decide whether the two year statute of limitations provided in Section 6 of the Portal-to-Portal Act of 1947, 61 Stat. 87, 29 U.S.C.A. § 255, is applicable to actions by the United States to enforce the child labor provisions of the Walsh-Healey Act. We hold that the limitation period is not applicable.

The basis of this action is the knowing employment by defendant of minors in the performance of government contracts in violation of the Walsh-Healey Act, 49 Stat. 2036-2039, 41 U.S.C.A. §§ 35-45. Pursuant to Section 5 of that Act, the Secretary of Labor issued a complaint on April 17, 1947, charging defendant with numerous childlabor violations during the years 1942-1945. After a hearing, as provided by statute, the hearing examiner rendered a decision on February 25, 1949, in which he found that defendant had wrongfully employed minors for a total of 1560 days and was indebted to the United States in the sum of $15,600 as liquidated damages. In January 1950, the Attorney General instituted this action by a complaint filed in the District Court for the District of New Jersey. Upon motions for summary judgment by both parties, the district court held the action barred by the two year limitation period of Section 6 of the Portal-to-Portal Act.*fn1

Section 6 of the Portal-to-Portal Act reads as follows:

"Any action commenced on or after May 14, 1947, to enforce any cause of action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages, under the Fair Labor Standards Act of 1938, as amended, the Walsh-Healey Act, or the Bacon-Davis Act [40 U.S.C.A. § 276a et seq.] -

"(a) if the cause of action accrues on or after May 14, 1947 - may be commenced within two years after the cause of action accrued, and every such action shall be forever barred unless commenced within two years after the cause of action accrued;

"(b) if the cause of action accrued prior to May 14, 1947 - may be commenced within whichever of the following periods is the shorter: (1) two years after the cause of action accrued, or (2) the period prescribed by the applicable State statute of limitations; and, except as provided in paragraph (c), every such action shall be forever barred unless commenced within the shorter of such two periods * * *." 61 Stat. 87, 29 U.S.C.A. § 255.

The crucial issue before us is one of statutory construction: Does the term "liquidated damages" as used in the above section refer to liquidated damages generally or merely to liquidated damages in connection with unpaid minimum wages and unpaid overtime compensation? Our study of the Portal-to-Portal Act in its entirety and its legislative history has convinced us that the clearly manifested intent of Congress was to place a limitation period only on actions for unpaid minimum wages and unpaid overtime compensation and (when permitted by law) any sums recoverable as liquidated damages in such actions. To interpret Section 6 as comprehending suits for liquidated damages by the Attorney General to enforce the child labor provisions of the Walsh-Healey Act would, in our opinion, radically distort the intent of Congress.

The Walsh-Healey Act of 1936 was enacted to harness the leverage effect of the government's immense purchasing power in the interest of higher labor standards. Endicott Johnson Corp. v. Perkins, 1943, 317 U.S. 501, 507, 63 S. Ct. 339, 87 L. Ed. 424. Section 1 of the Act provides that certain representations and stipulations must be included in all contracts with the government for "the manufacture or furnishing of materials, supplies, articles, and equipment in any amount exceeding $10,000". The contractor must agree that all persons employed in the performance of the contract be paid not less than minimum wages as determined by the Secretary of Labor to be the prevailing minimum wages for persons employed in similar work in the same locality. No more than 8 hours of work a day or 40 hours a week are permitted, subject to certain exceptions. And, more pertinent to our problem here, the employment of boys under 16 and girls under 18 is prohibited. Section 2 of the Act fixes the liability for any breach of the stipulations and representations of the contract and authorizes the Attorney General to institute suits for damages. Violation of the child labor provisions renders the contractor liable in liquidated damages to the United States in the sum of $10 a day for each minor wrongfully employed. Breach of the minimum wage and maximum hour stipulations renders the contractor liable for the amount of the underpayment due the employee which sums are held in a special deposit account by the Secretary of Labor to be paid directly to the underpaid employees. The $10 a day in liquidated damages for the wrongful employment of a minor, however, does not inure even indirectly to the benefit of the minor and is thus realistically a penalty imposed by the United States to enforce the compelling public interest in safeguarding the health of our children.

Two years after the Walsh-Healey Act was passed, Congress enacted the Fair Labor Standards Act, 52 Stat. 1060-1069, 29 U.S.C.A. §§ 201-219, which, inter alia, fixes minimum wage rates and maximum hours for employees engaged in commerce or in the production of goods for commerce,*fn2 and prohibits shipments in interstate commerce of goods produced in an establishment where oppressive child labor has been employed.*fn3 The United States is empowered to enforce the provisions of the Act by criminal prosecutions for willful violations*fn4 and by seeking injunctive relief.*fn5 In the case of violations of the minimum wage and overtime provisions, the employee is granted the right to recover from his employer the amount of the underpayment plus an additional equal amount as liquidated damages.*fn6 But no analogous right is given to minors employed in violation of the child labor provisions, which are enforceable solely by the United States.

The Portal-to-Portal Act of 1947 was a manifestation of Congressional reaction*fn7 to the decision of the Supreme Court in Anderson v. Mt. Clemens Pottery, 1946, 328 U.S. 680, 66 S. Ct. 1187, 90 L. Ed. 1515. The Court there held that time spent by employees walking to work on the employer's premises and time engaged in certain preliminary activities should be included in the compensable workweek, subject to the possible application of the de minimis rule. Section 1 of the Portal-to-Portal Act sets forth at length the findings of Congress and a declaration of policy.The pertinent portion of this Section is as follows:

"(a) The Congress finds that the Fair Labor Standards Act of 1938, as amended, has been interpreted judicially in disregard of long-established customs, practices, and contracts between employers and employees, thereby creating wholly unexpected liabilities, immense in amount and retroactive in operation, upon employers with the results that, if said Act as so interpreted or claims arising under such interpretations were permitted to stand, (1) the payment of such liabilities would bring about financial ruin of many employers and seriously impair the capital resources of many others * * *; (4) employees would receive windfall payments, including liquidated damages, of sums for activities performed by them without any expectation of reward beyond that included in their agreed rates of pay; * * *.

"The Congress further finds that the varying and extended periods of time for which, under the laws of the several States, potential retroactive liability may be imposed upon employers, have given and will give rise to great ...


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