On the suit of the Wage and Hour Administrator, the Western Union Telegraph Company was enjoined in the district court from violating the provisions of Sections 6 (a) (4), 7 (a) (3), 11 (c), 15 (a) (2) and 15 (a) (5) of the Fair Labor Standards Act of 1938, Act of June 25, *66 1938, c. 676, 52 Star. 1060, U.S.C.A., Title 29, Section 201 et seq., at eight Kentucky towns, namely: Cynthiana, Georgetown, Harrodsburg, Irvine,- Morehead, Nicholas-ville, Paris, and Versailles.
Specifically, the injunction was against employment by Western Union, in the operation of its facilities or equipment in carrying on its telegraph business at the named places, of any persons at a rate less than 40 cents an hour, except when a lower wage rate is authorized by an applicable order of the Administrator issued under section 8 (e) of the act, or when the employees are paid wages authorized by a special certificate issued under section 14 of the act. The company was also enjoined from employing persons at such places for a work-week longer than 40 hours, unless the employee receives compensation for a workweek in excess of 40 hours at a rate not less than one and one-half times the regular rate at which he is employed.
The injunction decree contained a mandate that Western Union shall not fail to make, keep and preserve records of its employees at such places, including all persons suffered and permitted to operate its facilities and equipment in carrying on its telegraph business at the named places, “and of the wages, hours and other conditions and practices of employment maintained by it, as prescribed by the regulations of the Administrator issued, and from time to time amended, pursuant to Section 11(c) of the Act, and found in Title 29, c. V, Code of Federal Regulations, Part 516.” The Western Union Telegraph Company has appealed from the injunction decree.
The district court filed comprehensive findings of fact, which are challenged by appellant as clearly erroneous in certain aspects. Upon consideration of the lengthy transcript of evidence in the case, showing in detail the method of conduct of Western Union’s business at each of the eight named places, we cannot accept the criticism as well grounded. In our view, the district court set forth without over-expanding minutiae a sufficiency of relevant facts important to decision, and no material discrepancy is disclosed in the findings when checked with the evidence introduced at the trial. The material findings of fact upon which the injunction was issued are certainly not deemed “clearly erroneous.” Indeed, the findings are in no significant aspect contrary to the evidence.
As is well known, the Western Union Telegraph Company is now and long has been serving the public with the facilities for interstate and world-wide telegraphic communication. The company’s operations include money order transfers; and the telephone, teleprinter and cable, as well as the telegraph, are embraced in its utilities. The present controversy relates to the method of operation of its business in small towns through what are designated as “9A offices.” The eight towns here involved fall within that designation; and, in each, the company’s business had been formerly transacted by payroll personnel who used its equipment. When the change was made, the telegraph company selected a “9A agent” in each town who, it contends, was-an “independent contractor” under the arrangement made. The Administrator denies this contention; and the district court has held that none of these agents was an independent contractor.
Since February, 1944, all arrangements with 9A agencies have been made orally, the use of written contracts having been abandoned. The principal purposes of converting company offices into agency offices were to save money by reducing expenses, mainly wages paid, and to increase revenue by extending hours of service. In' inaugurating the new plan, Western Union endeavored to place, under a commission and delivery allowance arrangement, its equipment in a local establishment, preferably a hotel, drug store, bus station, insurance office, or the like. Either the establishment, or some person therein, was carried on the company’s records as its agent at the particular place.
The agents chosen by Western Union were appointed so as to procure essential personnel for transacting its communications business at all places covered by the injunction. Company equipment was used in each place in conformity with prescribed standards of service. Such supervision and control as was necessary to that end *67 was exercised by the company; and, as was found by the district court, “for all practical purposes, other than the direct hiring and firing of personnel employed by the agents and direct payment of salaries to some of such personnel, the Company’s relation to the agencies has been and is substantially the same as it was before the conversion was effectuated.”
Western Union supplied, installed, inspected, repaired and maintained in these agencies all equipment necessary for handling its telegraphic business. The equipment included teleprinters, typewriters, operating tables, safes, lockers, counters, chairs, fans, stationery, tariff books, forms, supplies, pencils, delivery rules, letters of instruction, and Western Union signs and advertising material: all of which remained the property of the company.
Agency offices are under the immediate supervision of the district superintendent of Western Union, who is assisted by designated managers in the vicinity of the agenc> offices. The district superintendent and his assistants are instructed by the general manager to supervise and deal with agency offices as if they were company offices.
The district court found that Western Union’s plan contemplated, at least for record purposes, that no individual or firm would be designated as its agent unless engaged in some independent enterprise, and that personnel of an agency would spend the greater portion of hours worked in activities other than transacting Western Union business. In practice, this plan was not fully consummated. Although on the records of the company a corporation or partnership was entered as agent, individuals at some places were dealt with as the company’s agents and held responsible for the company’s business. 1
In January, 1943, Western Union began making social security and withholding tax returns on individuals and partnerships appearing on its records as agents. Subsequently, the company recognized that expenditures by agents for rent, as well as for certain other items, were deductible from agency earnings and, accordingly, deducted those items before making tax returns on its agents.
The equipment of Western Union at each agency office is connected directly with a relay office under the supervision of a Western Union manager; and no message can be sent or received without passing through the relay office, where each message is audited and a complete record made of every transaction at the agency office. Messages violating Western Union regulations are intercepted.
By either mandatory rules and regulations contained in printed tariffs, delivery manuals, money order manuals, and circular letters of instruction, or through oral instructions, the company has dealt with matters of personnel, hours of work, and details concerning the form, content, receipt, delivery and transmission of mes *68 sages, as well as the rates to be charged and the means to be used in collecting.
Money orders constitute an important part of the business transacted at each agency office. All orders to and from an agency office are handled through a relay office, which exercises supervision over the money-order activities of the agency office. Money orders are paid by drafts drawn on Western Union funds in designated depositories. The personnel in agency offices are authorized to sign these drafts as Western Union representatives. Close supervision over money orders is exercised by the company, the agencies being strictly limited as to the amount of such orders permissible, as well as to the method of payment by the customer.
At each agency, a separate bank account is kept to cover both money order funds and funds received for the transmission and delivery of telegrams. At the expense of Western Union, all persons handling funds at its agencies are placed under bond to the company. Immediate investigation of an agency is made whenever it fails in any respect to observe Western Union’s money order regulations.
The credit risk on approved customers is assumed by the company; and, under arrangements made by Western Union with telephone companies, the agencies are permitted to charge messages to telephone numbers.
All bookkeeping and accounting pertaining to agency transactions is done by Western Union at its relay office. The agencies are accountable for charges as computed by the relay offices. All billing and collecting on agency charges and telephone accounts is done by the relay offices. Before the complaint in this case was filed, the agencies were required to transmit their gross receipts to the relay offices, where their commissions and expenses were computed before payment. Since the action was brought, the relay offices compute from company records the net amounts due Western Union, plus taxes, and bill the agencies for tlje same.
Agency offices are required to furnish telegraphic service for at least the hours published in the company tariffs, as well as for hours on Sundays and holidays required to be observed by Western Union. At some places covered by the injunction, the Western Union agencies have been in establishments which normally did not transact business on Sundays and holidays. Agents and operators are not permitted to reduce the hours of service without company permission.
It is important to observe that the agents involved herein have received commissions on the proceeds from transacting Western Union business, plus delivery allowances. Their earnings depend upon the rate of commission allowed and amount charged for services rendered. This rate is established by Western Union and varies from agency to agency. No messages may be sent or received by the agencies, except such as meet the rules and regulations of the company; and charges for services rendered may neither exceed nor be less than the charges prescribed by Western Union tariffs.
When an agency is established, a Western Union instructor is assigned to teach the personnel at the agency specifically and minutely how to use the Western Union equipment and to give details as to all rules, regulations and routines relating to every phase of the company’s business to be transacted at the agency. Tariffs, money-order manuals, rules, regulations and the like are furnished the agents, who are instructed to study and follow them in the transaction of Western Union’s business.
Frequent visitorial inspection of the agencies is made by Western Union representatives, to determine whether the company’s standards of service are being maintained and to take necessary steps to insure the maintenance of such standards. It was made clear that the company would terminate any agency, the personnel of which persisted in violating Western Union rules and regulations, or engaged in activities detrimental to the telegraph company’s public relations.
All complaints, except those of a minor sort, are handled directly by Western Union representatives; and the company as *69 sumes full responsibility for damage claims arising out of the transaction of its business at agency offices.
Western Union, through its representatives, was cognizant that certain individual agents did not participate in the transaction of its business and that such agents had employed others as operators. In several instances, where the agents were business establishments, it was known that additional personnel would be required and that working hours would be extended in order to transact the company’s business. Relief operators carried on Western Union’s payroll have been furnished when required.
Regardless of the particular manner in which an agency conducted Western Union business, operators in each instance were on duty and available to transact the company’s business during all hours worked by them. The greater portion of messages and money orders handled at the agencies was sent and received in interstate commerce.
During the period involved herein, the operators of Western Union’s facilities and equipment at the places covered by the injunction have worked regularly in excess of 40 hours per week. At some of the places, persons engaged in transacting Western Union’s business were paid wages at a rate less than 40 cents an hour.
In concluding portions of its 31 numbered findings, the district court found, upon supporting evidence, that in some instances the wages of the operator were paid by the person or establishment recorded as agent; in some instances, with the knowledge of Western Union representatives, the comirfission and expense checks issued in the name of the recorded agent have been endorsed by him and turned over to the operator ; in other instances such checks have been issued by Western Union directly to the individual operator, who was also the record agent.
The district court found that, except at Paris and Morehead, all persons engaged at Western Union agency offices covered by the complaint in the case received for their services only agreed weekly salaries or stipulated commissions, none being compensated for hours worked in excess of 40 during a work-week at a rate not less than one and one-half times the regular rate at which he was employed.
The district court found further that, in many instances, records as to hours worked, wages paid, and other conditions and practices of employment as required by regulations issued by the Administrator of the Wage and Hour Division, pursuant to Section 11(c) of the Fair Labor Standards Act, have not been kept with respect to persons engaged at the places covered by the injunction in operating the facilities and equipment and transacting the business of the Western Union Telegraph Company.
The telegraph company contends that it may in good faith utilize the services of an independent contractor within the meaning of the Fair Labor Standards Act; that its 9A agents are independent contractors; and that their employees are not, in fact, the employees of the telegraph company. Walling v. Sanders, 6 Cir.,
Walling v. American Needlecrafts, 6 Cir.,
The company insisted that these homeworkers were not employees as defined in the Fair Labor Standards Act, but were independent contractors. This contention was rejected and it was held that the women homeworkers, even though not supervised in their work and even though they furnished their own tools, such as frames, clamps, thimbles and needles, and determined their own hours of employment, came within the coverage of the Fair Labor Standards Act. The opinion pointed out the principle that the act is designed to implement a public social, or economic policy through remedies unknown to and often in derogation of the common law; and that in the status of the case the court was not concerned with the question of whether a master-servant relationship existed under otherwise applicable rules of the common law. [See National Labor Relations Board v. Hearst Publications, Inc.,
In discussing the opinion in Bowman v. Pace Company, 5 Cir.,
Citing the opinion of this'court in Walling v. American Needlecrafts, supra, and of the Supreme Court in Guiseppi v. Walling [decided with Gemsco v. Walling],
Appellant cites Walling v. Nashville, C. & St. L. Ry., 6 Cir.,
Another opinion of this court cited by appellant, Glenn v. Standard Oil Co., 6 Cir.,
Certainly, workers in an agency office of the telegraph company are not withdrawn from coverage of the Fair Labor Standards Act for the reason that some of them are engaged in local retailing work in addition to telegraphic work, or because of the location of the telegraph office in a retail or service establishment. See discussion in Roland Electrical Co. v. Walling,
In Wabash Radio Corp. v. Walling, 6 Cir.,
On June 16, 1947, the Supreme Court promulgated two opinions which, in our judgment, impel the conclusion that, to conform with their rationale, we must hold in this case that the Wage and Hour Administrator is entitled to the injunctive relief granted by the district court. See United States v. Silk (Harrison, Collector of Internal Revenue v. Greyvan Lines, Inc.),
In the Silk and Greyvan cases, involving employment taxes under the Social Security Act, 42 U.S.C.A. § 301 et seq., the Supreme Court stated at the outset that both cases turned on a determination as to whether the workers concerned were em
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ployees or independent contractors under the act. It was asserted that the same rules were applicable which had been applied to the National Labor Relations Act in National Labor Relations Board v. Hearst Publications,
In Rutherford Food Corp. v. McComb, supra, it was emphasized that, in applying the provisions of the Fair Labor Standards Act, the determination of whether a relationship is that of independent contractor or employee does not depend upon isolated factors, "but rather upon the circumstances of the whole activity.” [
Appellant relies heavily upon Blankenship v. Western Union Tel. Co., 4 Cir.,
The case had come to the Court of Appeals in an unusual course. An action had been instituted by the partners for a declaratory judgment that they were employees of Western Union and, as such, were entitled to the benefits of the Fair Labor Standards Act. The appellate court had before- it, on the employment question, only the contract, the complaint and the motion of Western Union to dismiss. The circumstances of the whole activity were, therefore, not comprehensively presented. Moreover, the Wage and Hour Administrator was not a party to the action, and had no opportunity to introduce evidence or to urge his position from the standpoint of an expert in the administration of the act.
We will not lengthen this opinion by setting forth the consideration from which the court drew-its conclusions. With due deference, we are not in accord with the reasoning of the Blankenship case and think that the decision is not in consonance with the rationale of the Silk and Greyvan, and Rutherford cases, supra, which were decided later. Moreover, we think the case out of line with other opinions which have heretofore been discussed or cited; among others, our own opinion in the American Needlecrafts case, supra.
It should be borne in mind constantly that the provisions of the Fair Labor Standards Act granting exemptions from the operation of the act are to be narrowly construed. See Phillips Co. v. Walling,
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The power of the district court .in its sound discretion to issue an injunction in a case of this character is too well established to require the citation of. authority. But see, for instances, Rutherford Food Corp. v. McComb, supra; Walling v. Twyeffort, Inc., supra; and Walling v. American Needlecrafts, supra. The appellant vigorously asserts its right to continue the practices which have been enjoined. This not only justifies, but necessitates, the injunctive process as the only practical and adequate remedy to protect the rights of the employees here involved.
In a supplemental brief, appellant argues that it is not obligated to employees of 9A agencies under the Fair Labor Standards Act of 1938, as amended by the Portal-to-Portal Act approved May 14, ■1947, Public Law 49, 80th Congress, chapter 52, first session, H.R. 2157, 29 U.S.C.A. § 251 et seq.; and that, in consequence of the enactment of the Portal-to-Portal Act, the courts have no jurisdiction in this action to enjoin the Western Union Telegraph Company “with respect to employees of 9A agents.”
We think the Portal-to-Portal Act of 1947 has no bearing here. The underlying reason for its enactment was to foreclose myriads of suits demanding some six billion dollars as compensation for “walking time” and the like, brought in pursuance of the doctrine announced by the Supreme Court in Anderson v. Mt. Clemens Pottery Co.,
From its legislative history, as well as from the language of the statute, there is no apparent purpose revealed in the Portal-to-Portal Act to enable an employer to shift liability under the Fair Labor Standards Act for compensable activities of its employees by adoption of any sort of independent contractor device. Section 2 of the Portal-to-Portal Act of 1947 has no applicability, for the reason that the Wage and Hour Administrator is not seeking to subject an employer “to any liability or punishment” under the Fair Labor Standards Act, but is seeking to prevent future violations of the act, which he has a plain right to do.
The judgment of the district court is affirmed.
Notes
“For example, for a number of months Western Union Records show Blue Grass Hotels, Inc., as its agent at Paris, whereas, with the knowledge and at the suggestion of Western Union representatives, the agency had been transferred to and was operated by Mrs. Frances Uuallen. In other instances a non-existent business was designated as record agent with the knowledge of Western Union representatives that no such business existed and that the Western Union business at such places was being transacted entirely by one person devoting his entire time thereto. As an example of this practice at Morehead, the agent at one time was purportedly the Elam & Elam Pet Shop, so designated at the suggestion of Western Union representatives, when no such business existed and Mrs. Otis Elam was the agent in fact, devoting her entire time to Western Union business; - at another time at Morehead and at the suggestion of Western Union representatives Z. Taylor Young purportedly was engaged in the real estate and feed business while acting as Western Union agent when, in fact, no such business existed. At Versailles' for a period of time Western Union records show the Central Kentucky Natural Gas Company and later the Frankfort, Kentucky Natural Gas Company as Western Union agent when, in fact, such companies had no interest in or control over the agency and, with the knowledge of Western Union representatives, all Western Union business was transacted by an individual.” (Quotation from Finding of Fact No. IX.)