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Hodgson v. Wheaton Glass Co.

decided: July 22, 1971.


Seitz, Chief Judge, Aldisert and Gibbons, Circuit Judges.

Author: Gibbons


This case is before us for the second time. The complaint, filed by the Secretary of Labor on January 18, 1966, charged the defendant with violations of the Equal Pay Act of 1963, 29 U.S.C. § 206(d) (1964), an amendment to the Fair Labor Standards Act of 1938. 29 U.S.C. § 201 (1964) et seq. The initial decision of the district court was a judgment in favor of the defendant. Wirtz v. Wheaton Glass Co., 284 F. Supp. 23 (D.N.J. 1968). This court reversed and remanded the case to the district court with direction to enter an appropriate judgment in favor of the plaintiff. Shultz v. Wheaton Glass Co., 421 F.2d 259 (3rd Cir. 1970), cert. denied, 398 U.S. 905, 26 L. Ed. 2d 64, 90 S. Ct. 1696 (1970). The district court then entered a final judgment enjoining future compliance by the defendant with the Equal Pay Act by equalizing the wage rates of its female selector-packer employees with those of its male selector-packer employees. The judgment also directed the defendant to determine the amounts withheld from the female selector-packers from March 1, 1965, the effective date of the Equal Pay Act, to the date the pay rates are equalized, and to pay over these amounts to the employees or their personal representatives with interest at six percent per annum. The judgment provides that any sums not paid over to employees or their personal representatives shall be covered into the Treasury of the United States as miscellaneous receipts. Hodgson v. Wheaton Glass Co., Civ. No. 53-66 (D.N.J., Nov. 9, 1970). Defendant appeals from those parts of the judgment directing the payment of back pay and interest either to the employees or to the Treasury of the United States. It relies on the novel question proviso in Section 16(c) of the Fair Labor Standards Act, 29 U.S.C. § 216(c) (1964), which in relevant part provides:

"When a written request is filed by any employee with the Secretary of Labor claiming unpaid minimum wages or unpaid overtime compensation under section 206 or section 207 of this title, the Secretary of Labor may bring an action in any court of competent jurisdiction to recover the amount of such claim: Provided, That this authority to sue shall not be used by the Secretary of Labor in any case involving an issue of law which has not been settled finally by the courts, and in any such case no court shall have jurisdiction over such action or proceeding initiated or brought by the Secretary of Labor if it does involve any issue of law not so finally settled."

Defendant contends that issues of law finally settled in this case were, at least until the Supreme Court denied a petition for certiorari to review our earlier decision, issues of law not finally settled.

The plaintiff contends, first, that the issues involved in the case were factual rather than legal or if legal not novel, and second, that the novel question proviso has no application to suits by the Secretary brought under § 17 of the Act. 29 U.S.C. § 217 (1964). These contentions may be considered separately, since if the plaintiff is correct on either the judgment of the district court must be affirmed. The resolution of the issues posed by either contention, however, requires an understanding of the complex history by which §§ 16(c) and 17 reached their present form.

Prior to 1949 the Fair Labor Standards Act provided that employees could bring suit for recovery of unpaid minimum wages or overtime compensation plus liquidated damages. That right still exists. 29 U.S.C. § 216(b) (1964). Prior to 1949, § 17 of the Act provided that the district courts had jurisdiction to restrain future violations of the Act. There was no statutory provision whereby the Secretary could bring suit on behalf of the employees to recover back wages. By administratively developed practice the Secretary,*fn1 after investigation, often supervised the collection and payment of agreed upon settlements. That procedure for encouraging voluntary payments in settlement was largely ineffective, however, because the employer, even though he paid voluntarily, remained liable, if the employee sued, for liquidated damages and attorneys' fees. Rigopoulos v. Kervan, 140 F.2d 506 (2nd Cir. 1943). Probably recognizing that employee suits would be rare and voluntary payment after investigation unlikely, some courts developed a rule that in a suit by the Secretary to enjoin wrongful discharge or underpayment violations a court of equity, in order to afford complete relief, could issue an injunction requiring the payment of back wages. McComb v. Frank Scerbo & Sons, Inc., 177 F.2d 137 (2nd Cir. 1949) (underpayment); Walling v. O'Grady, 146 F.2d 422 (2nd Cir. 1944) (wrongful discharge). The evolution of what became known as the Scerbo type remedy suggested certain problems. In the Portal-to-Portal Act of 1947, 29 U.S.C. § 255 (1964), as amended, 29 U.S.C. § 255 (Supp. III, 1968), Congress had imposed on Fair Labor Standards Act claims a two year statute of limitations. Could the Secretary's equity suit circumvent this limitation? Also, what effect did the Secretary's equity recovery have upon a later action at law by the employees for liquidated damages? See Rigopoulos v. Kervan, supra ; 63 Harv. L. Rev. 1078, 1079 (1950). Acting on these concerns, Congress in the Fair Labor Standards Act of 1949, Act of Oct. 26, 1949, ch. 736, § 14, 63 Stat. 919, amended both § 16 and § 17. See Senate Report No. 640, Conference Report No. 1453, 2 U.S. Code Cong. Serv. 81st Cong., 1st Sess. 1949, pp. 2247, 2273.

The 1949 Act added the present § 16(c), which did the following:

(1) It gave statutory recognition to the administrative practice of supervision by the Wage and Hour Administrator of payment of unpaid minimum wages and overtime compensation, and it overcame the Rigopoulos problem by providing that an agreement by an employee to accept such payment constituted a waiver by him of any claim under § 16(b).

(2) It gave partial statutory recognition to the Scerbo remedy by providing that the Administrator could, at the request of any employee, bring suit for back wages.

(3) It made clear that the Portal-to-Portal Act statute of limitations was applicable to such a suit by the Administrator.

(4) It introduced the novel question proviso quoted hereinabove.

The novel question proviso was not in the original Senate Bill, S. 653. That bill proposed a somewhat broader recognition of the Scerbo remedy, providing that the Administrator could sue for back wages not only at the request of, but also with the consent of the employees. In conference the consent provision was omitted and the novel question proviso added. The Conference Report says with respect to the proviso:

"The conference agreement adds a proviso to prevent the Administrator from using the authority granted in this section to bring test cases involving new or novel questions of law. The Administrator may use his authority under this section to bring a suit for an employee only in cases where the law has been settled finally by the courts. The proviso is not intended, however, to preclude the Administrator from instituting suits or the court from taking jurisdiction on the basis of existing legal precedents under the Fair Labor Standards Act of 1938 as ...

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