Lead Opinion
Defendant Klinghoffer Bros. Realty Corp. and its codefendant officers, Albert Klinghoffer, president, and Irving Jacobson, vice-president, appeal from convictions after trial by jury on three counts of violating the Fair Labor Standards Act, 29 U.S.C. §§ 206(a), 207(a), 211(c), 215(a), 216(a). The prosecution arose from the action of the defendant corporation in requiring four employees to perform additional overtime work for the benefit of a financially embarrassed affiliate, under an arrangement whereby the employees were not compensated for such additional overtime until the affiliate emerged from a bankruptcy proceeding. The jury below found that this arrangement violated the $1.00 minimum wage requirement of 29 U.S.C. § 206 and the overtime provisions of § 207(a), and was accompanied by the keeping of false records in violation of § 211(c).
The factual background. The defendant corporation is one of ten corporations having the same officers and shareholders and constituting the “Rotobroil group,” an enterprise generally engaged in the manufacture and sale of electric broilers. On April 7,1957, four of these companies, following certain financial reverses, filed petitions for arrangement under Chapter XI of the Bankruptcy Act. One of the companies so filing was Jay Kay Metal Specialties Corporation, a manufacturing concern occupying five of six floors in a building at 3408 Northern Boulevard, Queens, as sublessee of the defendant corporation, which was lessee of the entire building. On April 7, 1957, Jay Kay Metal, as an economy measure, terminated the services of a detective agency which had previously been employed to furnish guards for the property at 3408.
To maintain a guard service for that property the defendants then determined to utilize the services of four guards regularly employed by defendant Klinghoffer Bros. Realty Corp. at a nearby building owned and managed by said defendant at. 3300 Northern Boulevard. On or about April 12, 1957, defendant Jacobson told' the guards that the company’s financial embarrassment made it necessary for them to put in some additional work at. 3408 without compensation. The guards
For each week during which the arrangement was in effect, the guards turned in time cards showing the amount of straight- and over-time worked at 3300. Each card, after being checked by the supervisor, was forwarded to the payroll department, which issued payroll checks in the name of the corporate defendant on the basis of the number of hours reported. The time worked at 3408 was not marked down on these time cards, and does not seem to have been reported to the defendants until December 1958 — seventeen months after the employment in question. At that time the defendants, who had already been indicted, invited the guards to submit schedules of the hours worked at 3408 and to accept payment therefor by checks issued in the name of Jay Kay Metal. All of the guards accepted this invitation except for guard Conroy, who declined upon the advice of the district attorney. This belated payment was made about a month after the plan of arrangement of Jay Kay Metal in the Chapter XI proceedings was confirmed. Aside from the schedules just referred to, the only record which was kept of the overtime at 3408 was a daily log record maintained by the guards, but which does not appear to have been in the possession of the employer.
Count 1. Count 1 charges that the failure promptly to pay any wage for the additional overtime put in at 3408 violates the $1.00 minimum wage requirement of 29 U.S.C. § 206 (a). But no guard received less than $67.20 for a 40-hour week, and no guard worked more than 67 hours. Thus the average weekly wage received by the employee met the requirements of § 206(a). The government argues, nevertheless, that all of such weekly wage was allocated by agreement to the work done at 3300, so that the work at 3408 was performed without pay. Therefore, it is contended, the time worked at 3408 was paid for at a rate of $0.00 per hour, or an amount less than the $1.00 minimum requirement.
If the total wage paid to each guard in this case during any given week is divided by the total time he worked that week, the resulting average hourly wage exceeds $1.00 for every week and every guard involved. We believe this is all that is necessary to meet the requirements of § 206(a). The Congressional purpose underlying that section was to guarantee a minimum livelihood to the employees covered by the Act.
Count 2. Count 2 charges a violation of the requirement of § 207(a) that an employer pay employees such as the guards in this case not less than one and one-half times their regular rate of pay for every hour in excess of forty. 29 U.S.C. § 203(d) defines “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” The corporate defendant was such an “employer” of the four guards with respect to the overtime at 3408, regardless of whether the actual employer, as that term is used in the law of contracts, was itself or Jay Kay Metal. For the corporate defendant, in making available its own guards to its financially embarrassed affiliate, either employed those guards itself or acted “directly or indirectly in the interest of” Jay Kay Metal, the other possible employer. Accordingly the failure of the corporate defendant to pay promptly the statutory overtime compensation was a violation of 29 U.S.C. § 207(a). The vague deferred compensation plan which appears to have been agreed upon is not sufficient to meet the requirements of that section.
While the FLSA does not expressly set forth a requirement of prompt payment, such a requirement is clearly established by the authorities, and is codified in interpretative regulation, 29 CFR § 777.2 (a), construing 29 U.S.C. §§ 206, 207, to require payment in cash or negotiable instruments payable at par, except as otherwise stated in § 3(m), 29 U.S.C. § 203 (m).
In Fleming v. Pearson Hardwood Flooring Co., D.C.E.D.Tenn.,
The guards in the instant case did not even receive scrip. All they had was a vague understanding that at some indefinite future date, related to the termination of the arrangement proceedings, they would be taken care of. In fact the understanding as to when payment would be made does not seem to have been clearly articulated. At the time the present prosecution was commenced they had been unpaid for approximately a year. Final payment was not made until seventeen months after the rendering of the services in question. Such delayed payment does not meet the requirements of § 207(a).
In Rigopoulos v. Kervan, 2 Cir.,
In Brooklyn Sav. Bank v. O’Neil,
Further recognition of the necessity of prompt payment may be found in Keen V. Mid-Continent Petroleum Corp., D.C. N.D.Iowa,
Both of the individual defendants knew of the arrangement for deferred compensation and were instrumental in putting it into effect. The jury was justified in finding that these actions were taken deliberately and, if not in intentional disregard of the statute, at least with reckless indifference toward it. This willfulness on the part of the individual defendants may be imputed to the corporate defendant. We find that the charge to the jury on the question of willfulness was satisfactory and that the jury’s verdict was supported by substantial evidence.
In its charge to the jury the court defined willfully as “performing an act-knowing it to be wrong or being aware of the wrong. To do a thing inadvertently, accidentally, or by honest mistake is not a wilful act.” Thus the jury was properly instructed to acquit if it found that the defendants either (1) did not intentionally perform the acts constituting the violation of the statute or (2) intentionally performed such acts in the honest, but mistaken, belief that they were complying with the statute.
The jury subsequently requested the court to “clarify the meaning of intentional falsification as it relates to Count 3 of the indictment.” In response to this request the court gave an instruction on willfulness which failed to indicate that an honest mistake as to law, made after diligent inquiry, would be a valid defense. The term “willfully,” as used in the FLSA, includes such a defense, and this instruction was therefore erroneous. But since the erroneous instruction was limited to Count 3, the conviction under Count 2 must be affirmed.
Count 3. Count 3 charges an intentional falsification of records in violation of 29 U.S.C. §§ 211(c), 215(a) (5), and 216(a). The court charged that the jury could find the defendants guilty under this count if it found that the records kept by defendant Klinghoffer Bros. Realty Corp. failed to state the time worked at 3408. If the actual employer for such time, as a matter of contract law, was Jay Kay Metal, however, the records kept by the corporate defendant accurately showed the time which the guards worked for that defendant. “False” means failing to show the true agreement between the parties. Accordingly the jury should have been instructed to acquit on Count 3 if the 3408 overtime was performed with the understanding that Jay Kay Metal would be deemed the employer for such overtime. For though Jay Kay Metal may have been a joint employer with the corporate defendant, that fact did not impose on the latter a duty to keep in its records notation of work which was done for Jay Kay Metal as actual employer, and which is imputed to the corporate defendant only as a matter of statutory policy. The conviction under Count 3 is reversed. On a retrial, if the government presses for one, instructions should be given as indicated above.
Other contentions of the appellants lack substance. We have examined the grand jury minutes and find no abuse of discretion in the court’s refusal to make them available to the defendants. See United States v. Spangelet, 2 Cir.,
Convictions on the first count reversed and that count dismissed; convictions on the second count affirmed; convictions on the third count reversed and proceedings remanded for action not inconsistent with this opinion.
Notes
. Cf. Conference Report, H.R.Rep. No. 2738, 75th Cong., 3d Sess. 28 (1938); Sen.Rep. No. 884, 75th Cong., 1st Sess. 1-3 (1937); H.R.Rep. No. 1452, 75th Cong., 1st Sess. 8-9 (1937).
Lead Opinion
On Petitions for Rehearing
The defendants and the United States of America both petition for rehearing. We shall first consider the defendants’ petition, which may be disposed of quickly.
Defendants seek reconsideration of the court’s conclusion that their alleged right to inspection under the Jencks statute, 18 U.S.C. § 3500, was lost for lack of specific reference. We agree that “no ritual of words” is necessary to invoke the rights granted by the statute. See Howard v. United States, 108 U.S.App. D.C. 38,
The United States of America petitions for rehearing on the reversal of the conviction under Count 1 for failure to pay minimum wages. We concluded that 29 U.S.C. § 206(a) was not violated, because each employee received during each week compensation equal to or exceeding the product of the total number of hours worked and the statutory minimum hourly rate. The government contends that this holding runs counter to authority that payments for certain hours in excess of the statutory minimum cannot be reallocated to make up for deficiencies in payments made for other hours during the week. In general and except to the extent stated below we do not quarrel with the cases on which the government relies. We think, however, that their meaning cannot be stated so broadly.
The government first relies on a series of cases arising under the overtime provisions of 29 U.S.C. § 207(a) and holding that payments for straight time in excess of the statutory minimum wage cannot be reallocated to overtime hours to make up for deficiencies in overtime payments.
The existence of different rules regarding reallocation under § 206(a) and § 207(a) is an understandable result of the different functions of those two sections. The former is directed at providing a minimum living standard, and can be satisfied so long as the weekly wage is sufficient to provide that minimum. Section 207(a), on the other hand, is concerned also with deterring long hours by making such long hours more expensive for the employer. This purpose can be successfully accomplished only if the base for computing “time and a half” is the regular, rather than the minimum, wage. Otherwise an employer whose regular rate, was one and one-half times the minimum would face no incentive to avoid overtime.
The government also relies on cases involving a failure to allocate an amount equal to the statutory minimum to such “borderline” periods as lunch on the job, preparation for work, etc., which may be determined in certain circumstances to constitute compensable periods of employment. A failure to allocate at least the statutory minimum wage to these compensable “borderline” work periods has been held to violate § 206(a), even though the wage paid for the usual work hours exceeds the statutory minimum by an amount sufficient to make up for the deficiency in the “borderline” work time.
The prosecution also stresses that the position it advocates is that taken consistently by the Department of Labor over a period of years as shown by published opinions of the Administrator of the Wage-Hour Division, even though earlier rulings had been to the contrary. We do not stress this change in position further than to point out that the government’s present position, on its own showing, is not a necessary one, or one buttressed by precedents; and for the reasons we have indicated it should not be the interpretation given a penal statute. The desirable results urged seem to us amply secured under § 207(a), without extension of § 206(a) to this form of agreed wage reduction. The government’s petition is therefore also denied.
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