Jаmes P. MITCHELL, Secretary of Labor, United States Department of Labor, Plaintiff, Appellant, v. WHITAKER HOUSE COOPERATIVE, INC., et al., Defendants, Appellees.
No. 5513.
United States Court of Appeals First Circuit.
March 2, 1960.
275 F.2d 362
It seems to us that
A judgment will be entered affirming the judgment of the district court.
Philip S. Bird, Waterville, Maine, with whom Bird & Bird, Waterville, Maine, was on brief, for appellees.
Before WOODBURY, Chief Judge, and HARTIGAN and ALDRICH, Circuit Judges.
HARTIGAN, Circuit Judge.
This is an appeal from a judgment of the United States District Court for the District of Maine entered for the defendants after a trial before the court sitting without a jury.
The action was brought by the Secretary of Labor under
The Secretary contended, first, that the cooperative is not a bona fide cooperative controlled by its members, and that, in reality, the individual defendants control the cooperative, hence an employment relationship exists between the homeworker-members and the individual defendants; and second, even if the cooperative is a bona fide cooperative controlled by its members, the Act applies to such a member-controlled cooperative. The district court found that the individual defendants do not control the cooperative or its members, and that the members are not as a matter of economic reality working for the individual defendants. The Court also held that the provisions of the Act are not applicable to a bona fide cooperative controlled by the member-producers.
Findings of facts by the court sitting without a jury shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.
Fleming v. Palmer, 1 Cir., 1941, 123 F.2d 749, certiorari denied sub. nom. Caribbean Embroidery Cooperative, Inc. v. Fleming, 1942, 316 U.S. 662, 62 S.Ct. 942, 86 L.Ed. 1739, is distinguishable as not being a bona fide cooperative, so that in economic reality the members of the cooperative were in an employee relation to Palmer, and the cooperative
The essential factor in determining the application of the Act is whether or not there is an employment relationship, for that is the frame of reference in which Congress placed its mandates. Although the purposes of the Act have been broadly stated as “to exclude from interstate commerce goods produced * * * under conditions detrimental to the maintenance of the minimum standards of living necessary for health and general well-being * * *,” United States v. Darby, 1941, 312 U.S. 100, 109, 657, 61 S.Ct. 451, 455, 85 L.Ed. 609 the statute is drawn clearly to apply to employment relationships. See, e. g. Sec. 206, 52 Stat. 1062 (1938),
The Act states:
“(a) ‘Person’ means an individual, partnership, assоciation, corporation, business trust, legal representative, or any organized group of persons.
* * * * * *
“(d) ‘Employer’ includes any person acting directly or indirectly in the interest of an employer in relation to an employee * * *
“(e) ‘Employee’ includes any individual employed by an employer.
* * * * * *
“(g) ‘Employ’ includes to suffer or permit to work. * * * ”
52 Stat. 1060 (1938),
The language of these sections is not very helpful in deciding the instant case. However, the test of the applicability of the Act has been held to be whether or not as a matter of economic fact there is an employer-employee relationship involved. Fleming v. Palmer, supra; Mitchell v. Nutter, D.C.D.Me.1958, 161 F.Supp. 799.
It is clear that a cooperative can have employees. Farmers Reservoir & Irrigation Co. v. McComb, 1949, 337 U.S. 755, 69 S.Ct. 1274, 93 L.Ed. 1672; Puerto Rico Tobacco Marketing Coop. Ass‘n v. McComb, 1 Cir., 1950, 181 F.2d 697. But those cases did not involve the question of whether member-producers of a cooperative are considered employees of the cooperative and consequently within the provisions of the Act.
The only case which apparently involved this precise question was the district court decision in Fleming v. Palmer, supra, which was not reported. The district court‘s refusal there to enjoin the cooperative in regard to its members resulted from the court‘s conclusion that no employer-employee relatiоnship existed. Id., 123 F.2d at page 751. An analogous conclusion as to a partnership involving approximately one hundred persons was reached by the district court in Walling v. Plymouth Mfg. Corporation, D.C.N.D.Ind.1942, 46 F.Supp. 433, affirmed on other grounds, 7 Cir., 139 F.2d 178, certiorari denied, 1943, 322 U.S. 741, 64 S.Ct. 1144, 88 L.Ed. 1574. In each of those cases, however, the Court of Appeals stated that it was unnecessary for it to decide the question of applicability of the Act to a bona fide enterprise.
Additional authority for the conclusion that the Act doеs not apply to a cooperative such as involved here is found in the statement of the Administrator of the Wage and Hour Division, U. S. Department of Labor, that in certain situations there might be no employer-em
We believe that the instant case presents such a situation. The members of the cooperative individually are the producers of the goods in which the cooperative deals. We agree with the district court‘s characterization that “the members are engaged, through the Cooperative, in a joint venture for the production and sale of hand-knit infants’ outerwear.” Id., 170 F.Supp. at page 755. Where the items produced by the members are the units used for measuring each member‘s share in the cooperative‘s net income, we think, to quote again from the district court‘s opinion: “Their interests as members and producers are identical. The work they perform is performed by them as members of the Cooperative, and not as its employees.” Consequently, there is no employment relationship present in the production of the items and the Act is not applicable to this cooperative.
Judgment will be entered affirming the judgment of the district court.
WOODBURY, Chief Judge (concurring).
We believe that the instant case presents such a situation. The members of the cooperative individually are the producers of the goods in which the cooperative deals. We agree with the district court‘s characterization that “the members are engaged, through the Cooperative, in a joint venture for the production and sale of hand-knit infants’ outerwear.” Id., 170 F.Supp. at page 755. Where the items produced by the members are the units used for measuring each member‘s share in the cooperative‘s net income, we think, to quote again from the district court‘s opinion: “Their interests as members and producers are identical. The work they perform is performed by them as members of the Cooperative, and not as its employees.” Consequently, there is no employment relationship present in the production of the items and the Act is not applicable to this cooperative.
Judgment will be entered affirming the judgment of the district court.
WOODBURY, Chief Judge (concurring).
The courts should always be alert to ferret out and ever ready to strike down evasive schemes designed to circumvent the Fair Labor Standards Act. But there is a wide and well recognized difference between evasion and avoidance, and although the Cooperative here may have been organized to avoid the Act, if it is a bona fide organization, as we all agree, and not a sham as in Fleming v. Palmer, it seems to me that in economic reality it is an organization engaged in the business of marketing such of the products of its producer-members as they may see fit to submit to it for sale. As a sales agency for its producer-members it may have employees, but however broadly the term may be defined, I do not see how it can be said to be an “employer” with respect to its producer-members. I votе to affirm.
ALDRICH, Circuit Judge (dissenting).
I regret that I am unable to concur in the opinion of the court in this case. I quite agree that the district court‘s finding that the workers are not employees of the individual defendants, Bird and Whitaker, is based on substantial evidence, and must be sustained. In other
However, I think the matter lies deeper than this, and that the court is in error even if it could be assumed that all workers had a real vote, and an еqual interest in Cooperative‘s affairs. Cooperative still constitutes an independent entity within the meaning of the Act, whether it be regarded as a corporation, or as an “organized group of persons.”
If the thought is that Cooperative is simply a selling organization, because it serves to dispose of the product of its members, I suggest that it is no more a sales organization than is any other employer of homeworkers whose amount of production is self-controlled (but who werе restricted to selling to it). Clearly it does much more than dispose of the product. It is true, as the court says, that the “items produced by the members are the units used for measuring each member‘s share in the cooperative‘s net income.” But of what piecework employee is that not so, if one defines net income as the amount available from gross sales, after deductions, for labor and goods? Is the court saying it makes a difference because there is nothing provided by way of profits to stockholders?
I cannot feeling that the court has been moved by sympathy with the natural desire of these ladies to make some use of their spare time, in an awareness of the predicament they would be in if the Act were to be held aрplicable. But there is another side to the coin. These ladies are competing with other producers who must, perforce, respect the standards of the Act. Because of the existence of Cooperative they can, or believe they can, compete with other producers satisfactorily, whereas individually they could not hope to do so. If, for some reason, it is “fair” not to apply the Act to them, such a “fairness” is unfair to those others who must live up
* “Each member is entitled to one vote, to be cast in person and not by proxy.” 170 F.Supp. 743, 749.
The fact that members exercise a joint voice over Cooрerative‘s management, and elect officers and an executive committee, seems to me irrelevant. If a union were given a voice in management, would its members cease to be employees? If an employee acquires stock in his company, does he cease to be an employee? I do not believe that would be so even if the еmployees together acquired all of the stock—they would still be working for the corporate entity. Their employment status would remain, even though they might have acquired some additional status. Phrased in terms of the philosophy of the Act, this would be because while collectively they would have a voice, individually they would have none, or none of any consequence. And so here. The Supreme Court has emphasized that “employment” under this Act is broadly defined. United States v. Rosenwasser, 1945, 323 U.S. 360, 362, 65 S.Ct. 295, 89 L.Ed. 301; Rutherford Food Corp. v. McComb, 1947, 331 U.S. 722, 728-729, 67 S.Ct. 1473, 91 L.Ed. 1772, rehearing denied 332 U.S. 785, 68 S.Ct. 29, 92 L.Ed. 368. In a particular instance a court may believe, to quote the court below, that some particular workers do not “require the protection of the Act.” My brethren do not pick up this language, but I believe it accurately states their rationale. Perhaps, individually, some in fact do not. But I see no more basis for a court‘s saying that as the members “suffer or permit” themselves to work they do not require the protection of the Act, than there is for so determining as to any other worker who “voluntarily” chooses to work. That concept died a quarter of a century ago. I would reverse.