Mr. URHEIM. We are only offering one, and that is the language which I just quoted, which has also been offered by the National Retailer Lumber Dealers Association and which has the effect of doing away with the definition of the term "retailer" or anything like it. We feel this thing has gone so far, both in the courts and in the Wage and Hour Division, that it is going to be necessary to do away with it. Senator ELLENDER. To be more specific, in other words? Mr. URHEIM. That is right. Senator BALL. Thank you, Mr. Urheim. May I say the rest of the witnesses scheduled for today will be heard at 2 o'clock. We will recess until 2 o'clock. (Thereupon, at 12:15 p. m., a recess was had until 2 p. m., this day.) AFTERNOON SESSION Senator BALL. The committee will come to order. Our first witness is Mr. John F. Lane, counsel for the American Institute of Laundering. STATEMENT OF JOHN F. LANE, COUNSEL FOR AMERICAN Mr. LANE. My name is John F. Lane. I am a member of the firm of Gall & Lane, Commonwealth Building, Washington, D. C., which is counsel for the American Institute of Laundering, on whose behalf this statement is presented. The American Institute of Laundering has been the national trade association of the power-laundry industry since 1883. Power laundries are characterized by the fact that they perform the laundering with powered equipment, as distinguished from hand laundries, for example, which perform the laundering by hand. We speak principally for those power laundries which launder their customers' property, as distinguished from industrial and linen supply laundries, for example, which launder their own property for renting to their cus tomers. Laundries which wash clothes, garments, and so forth, with powered equipment serve individuals for their personal use as well as individuals and corporations for nonpersonal use. And this natural commercial incidence of the type of customer which buys their services is what causes our laundries to have such serious Fair Labor Standards Act problems. The American Institute of Laundering has an active membership of approximately 3,800 power laundries located throughout the country which account for approximately 85 percent of the annual national sales volume of all power laundries. In connection with the problems to be discussed today, it is important to bear in mind, I think, that the average power laundry represents a capital investment of only approximately $100,000, with annual sales of about $110,000, and employing only some 50 or 60 employees. These laundries, therefore, are, for the most part, small business enterprises, basically local in character, importance, and competitiveness. Indeed, more than 50 percent of them are organized in a noncorporate form; that is, are operated as partnerships or individual proprietorships. Although the Administrator apparently does not believe that these "small" businesses are, in fact, "small," I am content to quote his own figures on the point to prove mine. He quoted 1939 figures of the Bureau of Census (hearings of Subcommittee No. 4 of the House Committee on Education and Labor, p. 2630) to the effect that 51.8 percent of power laundries of the United States, or 3,511 establishments, reported annual gross sales receipts of $30,000 or more, accounting for 91.1 percent of the total of such receipts of all power laundries. If the Administrator insists that an establishment grossing $30,000 a year, or $575 per week, is not "small," we will have to differ with him. And if he proposes to apply the act to such service establishments as being "big" business, we must wholly disagree with him. Now, let us see the power laundries' problem under the FLSA. The ultimate basic problem of the laundry owner is a deceptively simple one. It is the problem of whether or not the act is applicable to him. In other words, is he within its scope? Is he covered by the statute or is he exempted from it? For practical purposes this question, in turn, hinges on the question of the applicability of the "service establishment exemption" of section 13 (a) (2) to laundries. Hence it is to this question that this statement is primarily devoted. It would seem that laundry owners could reasonably hope-indeed, it would seem they are entitled to expect that after 10 years of administration of this statute, at least a rough approximation of the laundry owners' status generally under the statute would have been achieved. Yet the incredible fact is that not only is such not the case, but many laundry owners are more uncertain and more confused concerning their status under this law today than they were as of the date of the law's enactment. Indeed, the Administrator himself, in concert with all of his expert assistance and advisers, is not able to tell many laundries of their precise status under the act. A brief résumé of the experiences to which laundry owners have been subjected by the various administrators of this statute will, I think, demonstrate quite clearly the complete accuracy of these statements and the inability of laundry owners to resolve the problem without appropriate amendments to the FLSA. Laundry owners' past experience under the FLSA: In order to made clear the numerous inconsistent and conflicting rulings to which laundry owners have been subjected in the course of the efforts of successive administrators to exclude them from the exemption contained in section 13 (a) (2), we have graphically outlined them in the document we have prepared and wish to offer to the committee as exhibit A. This exhibit is entitled the "Chronological History of Application of the FLSA 'Service Establishment' Exemption to Laundries During Nearly 10 Years of Administration." I respectfully request the members of the committee to address their attention to this exhibit. You will observe that on the bare question of the applicability of the act to laundries generally-as shown in the column "Extent of application of 13 (a) (2) to laundries"-the past 10 years of administration of this statute have, to say the least, been years of indescribable confusion, uncertainty, and inconsistency on the part of the respective Wage and Hour Administrators. From exhibit A it will be noted that we have gone through the following stages: First, from the time of the congressional debates on the FLSA, prior to enactment of the statute in June 1938 until June of 1941, or a period of 3 years, laundries generally were considered to be exempt from the act, and the Administrator had officially endorsed this understanding. Senator ELLENDER. How had he done that? Mr. LANE. If you will turn to exhibit A, you will note a reference to the debates on the bill in the House and Senate. On page 2, you will note the second reference. The Administrator of the Wage and Hour Division of the Department of Labor released the first Interpretative Bulletin No. 6 relating to the exemption 13 (a) (2). It stated: Typical examples of service establishments, akin to retail establishments, within the meaning of the exemption, are restaurants, hotels, laundries, garages, barber shops, beauty parlors, and funeral homes. There reference is made to "laundries" as typical examples of serv ices entitled to the exemption. Below that you will note in the "Official answers to questions" appears another statement to the same effect. So, I say, up until the year 1941, which is the next item referred to in that exhibit, we had very substantial reason for believing that the intent of Congress as reflected in the debates was also the position of the Wage and Hour Administrator. Senator ELLENDER. Wasn't that the same Administrator? Mr. LANE. I doubt it. I am not sure, but I think there was a change in 1940 or 1941. Secondly, then, in June of 1941 this status changed and laundries other than "home laundries"-whatever might then or now be connotated by that term-were ruled to be excluded from the exemption. Revised Bulletin No. 6 there, for the first time, indicated to the industry that a distinction should be made between the kinds of laundries involved. Senator ELLENDER. In the work done? Mr. LANE. In determining whether they were within or without the exemption, or how the exemption should be applied. Thereafter, varying tests were announced for the purpose of allegedly assisting in the determination of what laundries were subject to the act and what laundries were not subject to the act. Third, in July 1942, however, the Administrator advised Congressman Hartley that these distinctions were incorrect, that all laundries should be exempt, and that the Division's prior interpretation should be reversed. Senator, you will find, with regard to page 4 of exhibit A, the first item at the top of the page. The language is quoted as it appears in the Congressional Record from the then Administrator Walling to Mr. Hartley, in response to an inquiry directed to him. He said: I am very much inclined to the view that all laundries, regardless of whether they do so-called commercial work or not, were intended by the Congress to be exempt, as you definitely state, and regardless of the outcome of the litigation I am inclined at the present time to think that our interpretation should be reversed in this regard. (See Congressional Record, vol. 89, pt. 9, p. A 964.) I might interpolate at this point further and say that was in response to a letter from Congressman Hartley, in which he said he was a member of the congressional committee and in which he said at that time that it was no part of the desire of Congress to include laundries within the scope of the statute. Fourth: Nevertheless, the Administrator, apart from the comment made to Congressman Hartley, continued to pursue litigation against laundries, insisting to the courts that some laundries were subject to the act. Fifth: In August of 1943, however, he officially announced a policy of nonenforcement of the act as to laundries. Sixth But in December of 1946, after a Supreme Court decision which does not directly relate to laundries, as such, he withdrew his nonenforcement policy and stated that as of January 15 of 1947, last year, the act would be enforced against laundries and that the 13 (a) (2) exemption would not apply to laundries whose sale to other than private individuals exceeded 25 percent. The flagrant inconsistencies apparent in the foregoing respecting the basic question of the application or nonapplication of the act to laundries generally has also been demonstrated in connection with less fundamental, but equally important, subsidiary questions bearing on laundries' status under the statute. Thus, for example, as shown in more detail in exhibit A 1. In 1940 the Wage and Hour Administrator established a 50-percent rule for determining the permissive amount of nonexempt work an establishment could engage in without losing the exemption. In June 1941, however, this percentage test was changed to 25 percent, or just one-half of what it had been previously. In June of 1947 this 25-percent test was entirely rescinded in a blanket order. In March 1948, however, it was reinstated once again (13 F. R. 1376). And just last week, in his testimony before this committee on April 19, 1948, the Administrator admonished the Congress and industry, through his statement, that "if Congress wishes to continue (the 25-percent test) in effect" it "should have legislative aflirmation." Senator ELLENDER. Have you any evidence to give us to show what caused the Administrator to fluctuate in his views as has been the case here any pressure brought upon him? Mr. LANE. One of the great difficulties is in the underlying reasons. It is hard to arrive at an understanding of the underlying reasons. As a general proposition, the best answer is to state that they are just variations and fluctuations of administrative discretion. Senator ELLENDER. Do you think pressure of any kind from any source may have caused the Administrator to proceed as he did? Mr. LANE. I have no reason to believe that, Senator. Senator ELLENDER. On the other hand, do you think the industry is so variegated as to cause so many differences? Mr. LANE. Certainly not the laundry industry, for during the greater part of this period it had been operating on the principle that the act was not applicable to it. I certainly must confess an inability to understand fully the underlying reasons for these various changes. Some of them are commonly justified on the basis of changed requirements reflected in court decisions in typical cases. Senator ELLENDER. You gave us the number of your membership a while ago. Mr. LANE. Yes, sir; 3,800. Senator ELLENDER. Do you know what percentage of that number is engaged in home laundry as described by the Administrator in one of his rulings? Mr. LANE. No, Senator. We have no idea about that and we have considered efforts to try to find out what that information might be. But, as you will appreciate, I think when you realize the position in which we have been, we cannot expect an individual laundry owner to tell us in any informed sort of way whether he is subject to the act, whether he is within the scope of this statement; and the reason I say that is—and your question bears directly on this point-to the extent that a man may be engaged in doing laundry for individuals in their personal use, the Administrator would probably hold it is not covered by the statute, or that it is within the scope of the exemption. The difficulty comes about in the usual case where a man is engaged in a combination of laundry services for individuals for personal use and for others which might need to be considered. Doing your shirt and mine is obviously personal. Doing the towels of a barber shop when the barber serves you is another question. Senator ELLENDER. It sounds silly to me. Mr. LANE. Then, in June of 1941, revised Interpretative Bulletin No. 6 established a "price test" for determining whether sales were "retail." In November 1946, however, the Administrator advised us that his office was considering withdrawal or revision of this price test. To date, however, no official word has been forthcoming from the Administrator as to the conclusion he may have arrived at in the course of his deliberations on this question. He has, however, publicly recorded his view that "the price test has not contributed significantly to the effective application of this provision." (House hearings cited above, p. 2629.) Third, since June 1941, when the Administrator first began to develop a distinction between "home" and other laundries, it has been necessary for laundry owners to distinguish between "exempt servicing" and "nonexempt servicing." This has, in turn, required that each clearly nonindividual laundry customer be classified as "retail" or "nonretail." That is the point we were discussing just a moment. ago, While it has not been possible to catalog in detail the numerous interpretations and rulings attempting to cope with this classification problem, suffice it to say that they have been productive of the same inconsistencies, conflicts and uncertainties as the more general rulings respecting the application of the act generally. In fact, as exhibit B shows, as of today we cannot be sure as to how many types of laundry business should be classified. As a result of this experience, I say in all seriousness and in absolute and complete sincerity that in my opinion no other industry is or has been in such a dangerously uncertain and confused position under this, or probably any other, statute. The only completely satisfactory way to resolve the confused uncertainty of laundry owners to their status under the statute which carries, as it does, potential sanctions and liabilities more than adequate, not only to disrupt the small businesses constituting the laundry industry, but to bankrupt and ruin many of them completely, is to amend the act so as to exempt laundries beyond possibility of chal |