Senator BALL. Can you get the farm cooperatives to agree to that? Mr. WEISS. Some of them do. Some in your area agree with that. Senator BALL. Most of them do not.

Mr. WEISS. Weren't they more concerned with overtime? It still does not call for a minimum wage exemption under 13 (a) (10).

Senator BALL. That depends on where you put the minimum wage entirely. If it be 75 cents and a dollar plenty of people will claim exemption. Keep it at a reasonable minimum and I will agree that you do not need such a wage exemption. Your whole difficulty is that you are putting the rate so high that you have to permit certain sections of our economy to operate.

Mr. McCOMB. The 75 cents might be all right. I do not know how many would object at 75 cents.

Senator BALL. Some would. Some industries pay 75 cents minimum in the part of the industry and part of the industry does not. Those that do not would just as soon have their competitors hooked for the same wage rate.

Mr. WEISS. Section 7 (c) of the act, unlike 13 (a) (5) and 13 (a) (10), permits only overtime exemptions, but does so for some operations on an all year around basis, for others for only 14 weeks in the year, and for still others for 14 weeks if the establishment is "in the area of production." This section should be elminated from the act. The only changes provided for in S. 2386 are to place Section 13 (a) (10) and 7 (c) on an establishment basis, apparently in an effort to deal with one of the minor aspects of the problem. In both instances the bill would broaden the exemption. The language proposed for section 13 (a) (10) might make it possible to extend the exemption to activities wholly unrelated to the purpose of the exemption.

Senator BALL. Don't you think that the original intent of Congress was to exempt establishments in 13 (a) (10)?

Mr. WEISS. Not on the basis of the language.

Senator BALL. I realize that is not the way you have interpreted it. Mr. WEISS. I should refer that to our legal officer here. In 7 (c) it is mostly interpreted on an establishment basis, but not in all situations.

To return to Mr. McComb's statement, the language used in section 7 (c) would also appear to be susceptible of some abuse and it appears to broaden the present exemption for the meat packing industry very substantially. This industry does not need an overtime exemption, as proved by the fact that it has not utilized the partial exemption now available to it under section 7 (c). If Congress fails to accept my recommendation to eliminate section 7 (c) entirely, the least that should be done is to eliminate the meat packing industry from this exemption. In contrast with S. 2386, S. 2062 carries out my recommendations by limiting the fishery exemption to off-shore operations and by eliminating sections 7 (c) and 13 (a) (10) completely. It goes beyond my recommendations by eliminating section 7 (b) (3) as well. For reasons which I have indicated, I believe this section should be retained and broadened.

4. Seamen: I do not believe that I need say much regarding the extension of minimum wage protection to seamen. Special treatment with respect to the overtime provisions of the act may perhaps be justified but I can see no reason for failing to protect seamen from the payment of subminimum rates. This change, moreover-that is,

extending minimum wage protection to seamen-would tend to place various branches of transportation on a more nearly equal basis since both motor carrier and railway employees are now given minimum wage protection under the act.

If seamen are brought under the minimum-wage provisions of the act, as I suggest, certain additional changes in the statute should also be made. First, the definition of commerce should be changed in order to cover the homeward voyage of seamen as well as the outward voyage. As a matter of fact, this change of definition of commerce should be made in any event. A second change which should be made is to make it clear that the minimum wage for seamen should be exclusive of board and lodging.

Senator PEPPER. I am not quite clear as to what we did in 1945. That was the last act we had on the floor.

Mr. WEISS. Seamen were covered by the Senate. They were brought under the minimum wage.

Senator PEPPER. Both as to wages and as to hours?

Mr. WEISS. No. Just as to minimum wage.

Senator PEPPER. Yes. I believe it brought them under the act with respect to wages but not with respect to hours. Your recommendation is as to both?

Mr. WEISS. No. Just wages.

Senator PEPPER. Yes. The same as we recommended in 1945.

Mr. WEISS. S. 2386 fails to take any action to extend minimum-wage protection to seamen. S. 2062, as well as S. 1552, which was introduced by Senator White of Maine, carry out the suggestions which I have made but go beyond them in providing overtime coverage as well.

Professor Cox. Have you compared the present rate on seamen with the 75-cent minimum? How would the coverage affect them?

Mr. WEISS. It probably would not affect the oceangoing seamen who are probably getting more than 75 cents but it would affect some of the seamen on inland waterways who are probably getting less. Senator BALL. What about a 60-cent minimum?

Mr. WEISS. We do not have precise enough information to know how low they are paying on inland waters.

Senator BALL. Are there any substantial numbers of seamen either on the inland waterways or oceangoing who are not covered by collective-bargaining agreements?

Mr. WEISS. Some of the inland waterway seamen.

Senator BALL. And probably a few others.

Professor Cox. Where do you classify all the workers in the New York harbors?

Mr. WEISS. They are seamen.

Professor Cox. But when you say oceangoing and inland waters, which do they belong to?

Mr. WEISS. People in the harbors and rivers are considered to be working on inland waterways.

Professor Cox. That would even include the harbor of New York? Mr. WEISS. I think so.

Senator PEPPER. They are out.

Mr. WEISS. At present, yes.

Senator PEPPER. And you would bring them under?

75017-48-pt. 1—

Mr. WEISS. Yes. For minimum wages.

Senator BALL. What are the average wages of seamen? What is the going rate? Is there any effectual showing that they should have this protection?

Mr. WEISS. As of today most oceangoing seamen are above it. They were below these levels as recently as 2 or 3 years ago. The effect, of course, would be to protect the wages' going below the minimum level. It affects the future.

5. Motor-carrier employees: Another defect in the Fair Labor Standards Act which is urgently in need of correction is the overtime exemption for motor-carrier employees now contained in section 13 (b) (1) of the act. At the present time, the exemption is applicable to all employees for whom the Interstate Commerce Commission has authority to regulate hours of service pursuant to the provisions of the Motor Carriers Act of 1935. Under this provision the Interstate Commerce Commission has asserted jurisdiction over some half million employees but has actually fixed hours of service for drivers only, leaving a large group of employees in a sort of no-man's land: protected neither by the Fair Labor Standards Act nor by regulations issued by the Interstate Commerce Commission. Those employees include drivers' helpers, mechanics, and loaders.

Both S. 2386 and S. 2062 attempt to eliminate this defect, and I believe that a combination of the provisions proposed in these two bills would most adequately and effectively serve this purpose. S. 2386 limits the exemption to drivers, helpers, and others who ride on motor vehicles, which seems to me to form a logical basis for the exemption if one is to be retained. However, the bill permits the exemption to apply even if only a minor portion of the employee's time is spent on motor vehicles and, therefore, permits evasion of its intent by assigning inside employees to work on trucks for 1 day a week. Because of this defect, I believe the 50-percent test proposed in S. 2062 should be adopted.

Professor Cox. When you said that may be done as a means of evasion, did you take into consideration the Interstate Commerce Commission regulation?

Mr. WEISS. I don't know what you mean.

Professor Cox. I understand it would prevent that. Drivers have to meet all kinds of qualifications under the ICC regulations. You cannot put a driver or helper in a position to avoid the regulations. Mr. WEISS. I believe they have to meet certain requirements. Mr. NYSTROM. I think he is pointing out that they would have to meet qualifications for the men as well as the hours of the drivers.

Senator BALL. It seems to me an employer seeking to evade on that basis would not have enough interest to warrant the effort. It complicates the employer's books tremendously and the universal complaint I get is that the overhead costs involved in keeping all the records involved are one major item in opposition to some of the rules they run into.

We were trying to make it clear that an employer would know where he stood on this thing so it would not be one of those hazy things like the regular rate of pay which winds up in the courts.

Mr. NYSTROM. The only difference is, your bill suggests that if a man spends 20 percent of his time on a motor vehicle he is exempt.

The Administrator suggests that this be raised to 50 percent to prevent the possibilities of abuse.

Senator BALL. Go ahead.

Mr. WEISS. Continuing Mr. McComb's statement:

6. Regular rate of pay: It is my opinion that the term "regular rate" needs legislative clarification. If this legislative clarification were made along sound lines, I believe that it would eliminate the most troublesome difficulties which I have encountered since I became Administrator of the Fair Labor Standards Act. These difficulties arise from the fact that the original legislation did not define the term "regular rate"; nor did it grant the administrator authority to define this term through regulations. At a result, the definition of the term was left to a long line of court decisions, some of which have created difficulties for both management and labor. These difficulties relate to such matters as bona fide profit sharing plans, payments by employers into trust funds for the purpose of providing old-age pensions or other types of benefits, bona fide penalty payments for work outside the normal workday or work week.

This is not an easy problem to deal with because of the very serious possibility that the correction of legitimate problems might lead to a ready means for evading the overtime requirements of the act. If I seem unduly critical of S. 2386 in its attempt to deal with this problem, it is not because I don't recognize the difficulties involved. It is a problem for which we have long been seeking a solution and I hope to have available soon a draft of an amendment which I believe will solve our regular rate of pay problems in a more satisfactory manner than that proposed in S. 2386.

Senator BALL. How soon?

Mr. MCCOMB. That is the problem. We are working on it. It is very complicated.

Senator BALL. And you have been working on it for some time.

Mr. McCOMB. Yes, but we think we can get you something that will work better than this.

Mr. WEISS. Mr. McComb's statement continues:

S. 2386 attempts to deal with the problems concerning regular rate of pay in several ways. First of all, it outlines the methods to be used in calculating the rate of pay under different circumstances. The general rule appears to be that contained in the first paragraph of section 3 (n) (1). This rule does not appear to provide for payment on the basis of time and one-half the piece rate, and possibly for other methods of compensation which have been held to be valid under the existing law.

We have had very little difficulty in determining how the regular rate of pay is to be calculated once the questions of inclusion and exclusion have been determined. Nor do I think that labor and management have had any substantial difficulties in this regard.

The only substantial problem that I am aware of concerns the method to be used when an employee works at two different rates during the same work week, a problem which is dealt with in section 3 (n) (4) of the bill. On the assumption that the Administration could deal with this type of problem under a rule making authority, I do not see the necessity for specifying in the statute the various permissible methods for calculating the regular rate of pay.

S. 2386 then goes on to indicate what is to be included in the normal straight time compensation, what is to be excluded and credited to overtime compensation for the purposes of section 7, and what is to be excluded from the normal straight-time compensation but not to be credited to overtime compensation. The items specifically mentioned are, generally speaking, in accord with the present position of the divisions. However, production bonuses and other incentive payments are included in regular rate of pay only if they are determined "without reference to the profits of the enterprise." This last phrase seems to me unfortunate since it is possible that some reference to profits may be made in the course of discussions of bonuses or even as a condition for receiving a production type bonus. It seems to me that all production bonuses and other type of incentive payments which are directly related to the production or efficiency of an employee or group of employees should be included in the regular rate of pay.

Professor Cox. Would you go so far as to include a bonus of the type given by the Lincoln Electric where efficiency is taken into account in determining the annual bonus which is in addition to the share of profits?

Mr. WEISS. We have been trying to read up on that. We have found no precise method of ascertaining that bonus. It is rather an arbitrary decision of management. Even where is amounts to half the employee's earnings it is not related directly to profits but it is an arbitrary bonus determined by management.

Senator BALL. As I recall, they determine how much of the profits they will distribute first. Then they have several factors on which to determine the individual employee's share, one being his production record. But there is also his originality and application and new ideas he has proposed and his immediate supervisor's evaluation of his value to the whole enterprise.

Mr. WEISS. It is unlike any other bonus and is a peculiar kind of an animal.

Senator BALL. You do point out "without reference to the profits of the enterprise." But in distributing the profits would you go so far as to say the employer could not take into consideration efficiency? Mr. WEISS. I think the Administrator suggested that a bona fide bonus should be eliminated from the regular rate of pay.

Senator BALL. Even if efficiency is the consideration?

Mr. WEISS. Where the bonus is directly measured by efficiency that is not a profit-sharing type of bonus. In this Lincoln Electric case I could not comment on it without knowing more than the literature gives.

Senator BALL. It is a pretty effective type of bonus and it would seem wise to encourage it. But if it is to be subject to a retroactive levy for overtime pay these businesses will not adopt it but will encourage profit sharing and other means. We are trying to spell it out so clearly in this act that there will be no possible alibi for that kind of hairsplitting.

Mr. WEISS. I think you will find that the people who are sponsoring profit-sharing bonuses would not approve of the Lincoln Electric system.

Senator BALL. I don't care whether they approve it or not.

The record of the Lincoln Electric is clear. They have increased the income of their employees. They have cut their prices and increased