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POWELL ET AL. v. UNITED STATES CARTRIDGE CO.

decided: May 8, 1950.

POWELL ET AL
v.
UNITED STATES CARTRIDGE CO.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT.*fn*

Vinson, Black, Reed, Frankfurter, Jackson, Burton, Minton; Douglas and Clark took no part in the consideration or decision of these cases.

Author: Burton

[ 339 U.S. Page 498]

 MR. JUSTICE BURTON delivered the opinion of the Court.

The question in each of these cases is whether the Fair Labor Standards Act of 1938, as amended,*fn1 applies to a person employed by a private contractor at a Government-owned munitions plant operated by the contractor under a cost-plus-a-fixed-fee contract made with the United

[ 339 U.S. Page 499]

     States. We hold that the Act does apply but we do not reach the question of the validity of the individual claims based upon it.

This issue was argued here in Kennedy v. Silas Mason Co., 334 U.S. 249. We, however, remanded that case and withheld decision of the issue, awaiting a more solid basis of findings. Id. at p. 257. Each of the instant cases presents such a basis.

No. 96 (The Powell Case).

In December, 1940, the United States contracted with The United States Cartridge Company, respondent herein, as "an independent contractor and in no wise an agent of the Government" on a cost-plus-a-fixed-fee basis to operate the Government's St. Louis Ordnance Plant in Missouri.*fn2 The contract stated that it was authorized by the Act of July 2, 1940.*fn3 It provided that the respondent would operate the Government's plant for the manufacture of certain types and quantities of small arms ammunition, that the Government would reimburse the

[ 339 U.S. Page 500]

     respondent for its expenditures in such operation and, in addition, pay the respondent a fixed fee based upon the types and quantities of ammunition it supplied. The title to the site, plant, equipment and, in general, to the raw material, work in progress and finished munitions was to be in the Government.*fn4 Most of the materials were to be supplied by the Government. The contract provided expressly for the reimbursement of the respondent's expenses for labor. The respondent, in turn, agreed to supply practically all services incident to the setting up of an efficient operating force and to the operation of the plant until the required ammunition had been produced. The respondent was made responsible for storing the materials, supplies and finished ammunition and for loading the ammunition on cars or other carriers in accordance with the Government's instructions. The ammunition generally was shipped by common carrier on Government bills of lading to military destinations outside of Missouri. The Government reserved large rights of supervision, auditing and inspection to be exercised through its "Contracting Officer." The employees, including the petitioners, were to be hired, assigned, directed, supervised, paid and discharged by the respondent.

[ 339 U.S. Page 501]

     The contract stated expressly that all persons engaged in the work "shall be subject to the control and constitute employees of the Contractor . . . ." It quoted all of the "representations and stipulations" relating to employment directed by the Walsh-Healey Act.*fn5 Under it, the contracting officer (subject to a right of appeal) could require the respondent to dismiss any employee whom he deemed incompetent or whose retention "is deemed" not to be in the public interest. The contract made no express reference to the Fair Labor Standards Act. However, in a booklet which was distributed by the respondent, each employee at the St. Louis Ordnance Plant was informed, among other things, that "There will be eight hours in any working day, and forty hours will constitute a working week. . . . When production demands require a longer work day, or longer work week, the Company will pay the legal overtime rate as provided under the Walsh-Healey Act, and the Fair Labor Standards Act." (Emphasis supplied.)

The 59 individual petitioners were employed in the safety department of the plant. They alleged that, under the Fair Labor Standards Act, they were entitled to overtime pay which they had not received. They sued in the United States District Court for the Eastern District of Missouri to recover that pay, plus liquidated damages and an attorney's fee. The respondent denied liability on many grounds, including those that the Fair Labor Standards Act did not apply to employees at the St. Louis Ordinance Plant and that, in any event, these petitioners were not entitled to any recovery under that Act. After trial, the District Court entered judgment in favor of the petitioners for the total sum of $246,251.44 (twice the amount of the overtime pay claimed), plus $24,625 as an attorney's

[ 339 U.S. Page 502]

     fee and costs. The respondent moved for a new trial so that the Portal-to-Portal Act of 1947,*fn6 which had been adopted five days before the District Court's judgment, might be applied to the issues. The motion was denied and the case was appealed. While the appeal was pending in the United States Court of Appeals for the Eighth Circuit, the decision of this Court in Kennedy v. Silas Mason Co., supra, was announced. The Court of Appeals thereupon heard a reargument of this case with special reference to the issues raised in the Silas Mason case. Sitting en banc, it reversed the District Court and held that the Fair Labor Standards Act did not apply to employment at the St. Louis Ordnance Plant. 174 F.2d 718. All seven judges held that the Walsh-Healey Act applied to such employment to the exclusion of the Fair Labor Standards Act. Four of those judges also joined in an opinion (p. 726) stating that the Act of July 2, 1940, had given discretion to the Secretary of War to determine what overtime regulations should be applicable to Government-owned privately operated plants and that, through his adoption of the Walsh-Healey Act, he had rendered the Fair Labor Standards Act inapplicable under this contract. The Court of Appeals did not reach the merits of the individual claims of the petitioners under the Fair Labor Standards Act. We granted certiorari. 338 U.S. 810.

No. 79 (The Aaron Case).

This case presents substantially the same issue as that in the Powell case, but it relates to employees at the Arkansas Ordnance Plant. The issue arises on a summary judgment of the United States District Court for the Eastern District of Arkansas in favor of the respondent, rendered on pleadings, supporting affidavits, admissions

[ 339 U.S. Page 503]

     of fact and answers to interrogatories. The plant was operated by the respondent under a cost-plus-a-fixed-fee contract entered into with the United States in July, 1941, and generally comparable, for present purposes, with that in the Powell case. The petitioners, 1,278 in number, were handlers, carriers and processors of explosives, who claimed additional compensation under the Fair Labor Standards Act for approximately 35 minutes before, and 30 minutes after, their scheduled work in the plant. The respondent answered and moved for summary judgment on three grounds -- that the petitioners were not engaged in the kind of work that is covered by the Fair Labor Standards Act, that they are not within the coverage of the Act because they were employees of the United States, and that, by virtue of the Portal-to-Portal Act of 1947, they are not entitled to recover in any event.

In rendering judgment for the respondent, the District Court adopted its opinion in Barksdale v. Ford, Bacon & Davis, 70 F.Supp. 690. Without passing on other contentions, it there held that the Fair Labor Standards Act was not applicable because, in processing and assembling munitions under like conditions, the respondent had not been engaged "in the production of goods for commerce" within the meaning of that Act. The Court of Appeals for the Eighth Circuit affirmed, 174 F.2d 730, on authority of its decision in the Powell case, supra. We granted certiorari. 337 U.S. 955.

No. 58 (The Creel Case).

This case, from the Fifth Circuit, presents substantially the same issue as do the Powell and Aaron cases. The issue arises on a summary judgment in favor of the respondent, rendered by the United States District Court for the Eastern District of Texas on pleadings and supporting affidavits. Here the Lone Star Ordnance Plant,

[ 339 U.S. Page 504]

     near Texarkana, Texas, was owned by the Government and operated by the respondent under a cost-plus-a-fixed-fee contract entered into with the United States in July, 1941, comparable in its material features to those in the Powell and Aaron cases. The petitioners, several hundred in number, were employed at the plant in capacities such as those of truck drivers, lift-fork operators, loaders and unloaders. Their services were used in the production of munitions, such as shells, bombs, detonators and other ordnance items. The title to substantially all of the raw material, work in progress and finished products was in the Government. Most of the materials were furnished by the Government and the finished products were shipped in accordance with Government instructions on Government bills of lading to military destinations, usually outside of Texas. The petitioners sued for overtime pay claimed to be due them under the Fair Labor Standards Act. Quoting from the opinion of the District Court in the Barksdale case, supra, the trial court gave judgment for the respondent. The Court of Appeals for the Fifth Circuit affirmed. 171 F.2d 964. It stated that the respondent, on the record before it, was an agency of the Government, was not an independent contractor and was not engaged in commerce within the meaning of the Fair Labor Standards Act. We granted certiorari. 337 U.S. 923. We heard this case with the Powell and Aaron cases.

The United States filed a brief and argued here, as amicus curiae, in support of the petitioners on the limited issue now before us.

I. THE PETITIONERS WERE NOT EMPLOYEES OF THE UNITED STATES WITHIN THE MEANING OF THE FAIR LABOR STANDARDS ACT.

If the petitioners were employees of the United States, the Fair Labor Standards Act excludes them from its

[ 339 U.S. Page 505]

     coverage.*fn7 A similar defense is presented through the claim that the respondents were not independent contractors but were agencies of the United States, representing and binding the United States as their principal in the employment of petitioners.

In each contract, there was a provision comparable to the following quoted from the contract in the Powell case:

"Article I-E -- Authority of the Contractor.

"In carrying out the work under this Title I the Contractor is authorized to do all things necessary or convenient in and about the operating and closing down of the Plant, or any part thereof, including (but not limited to) the employment of all persons engaged in the work hereunder, (who shall be subject to the control and constitute employees of the Contractor), . . . . " (Emphasis supplied.)

Each contract is replete with references to the persons employed as the "employees of the Contractor" or "persons employed by the Contractor."

The contract in the Powell case contained the following additional clause:

"Article III-A -- Status of Contractor.

"It is expressly understood and agreed by the Contractor and the Government that in the performance of the work provided for in this contract, the Contractor is an independent contractor and in no wise an agent of the Government." (Emphasis supplied.)

[ 339 U.S. Page 506]

     Such provisions are persuasive that the petitioners should be recognized here as employees of the respective respondents and the respondents as independent contractors. The respondents argue, however, that the context of the times, other provisions of the contracts and the practice under the contracts deprive these statements of their ordinary meaning. We find, on the contrary, that each of these sources supplies additional evidence that these provisions correctly state the true relationship between the petitioners and respondents.

For example, we find in these contracts a reflection of the fundamental policy of the Government to refrain, as much as possible, from doing its own manufacturing and to use, as much as possible (in the production of munitions), the experience in mass production and the genius for organization that had made American industry outstanding in the world.*fn8 The essence of this policy called for private, rather than public, operation of war production plants. This purpose shines through the following clause in the contract in the Powell case:

"Whereas, The Government desires to have the Contractor, as an independent contractor on a cost-plus-a-fixed-fee basis, make all necessary preparations for the operation of said plant, including the training of operating personnel. . . but excluding the procurement and supervision of the installation of manufacturing facilities [to be done, under a like contract, by the contractor's ...


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