would force them out of business. It would require the producers who now collectively own vast forests in the Southeast to withdraw those forests from the production of gum naval stores and devote them to use for lumber, poles, pulpwood, and piling. A living standing tree is capable of yielding an annual crop of crude gum, the aggregate of which makes an extremely important contribution to the economy of the Southeast. That same tree, cut into boards, is gone forever. To deprive gum naval stores laborers of their employment by wrecking the gum naval stores industry under the guise of a supposedly beneficent statute like the Fair Labor Standards Act, would be the cruelest kind of mockery.

CONCLUSION

The American Turpentine Farmers Association Cooperative is an incorporated cooperative association of producers of gum naval stores. Its members produce more than 90 percent of the crude gum in the United States. The activities of its members range from ownership and control of large tracts of timber to hundreds of dirt farmers owning small wood lots in conjunction with their ordinary dirt-farming operations, from which wood-lot operation the farmer derives a year-around crop that can and does make substantial contribution to the rural economy of the Southeast.

This association believes sincerely that the retention of the exemption extended with respect to the employment of gum naval stores laborers themselves than it is to the producer members of this association. As I have stated above, the timberowning members of this association can devote their forests to other purposes. If they are compelled to do so, the gum naval stores laborer will have lost his livelihood and, in nearly every instance, his home.

It is respectfully urged that the foisting of such benefits upon these laborers is not in the national interests.

Senator PEPPER. We will hear next from the Office Employees' International Union, A. F. of L., Mr. Paul R. Hutchings, president. Go right ahead, Mr. Hutchings.

STATEMENT OF PAUL R. HUTCHINGS, PRESIDENT, OFFICE EMPLOYEES' INTERNATIONAL UNION, AMERICAN FEDERATION OF LABOR

Mr. HUTCHINGS. Thank you, Senator Pepper.

I filed with the committee a formal statement on behalf of the Office Employees' International Union of the American Federation of Labor. Our statement is limited specifically to one problem, the one that has come to be known as Chinese or coolie overtime.

Rather than burden you with a direct reading of this statement, in line with your earlier statement to a previous witness, I thought I would summarize it as I go along, with the understanding that my full statement will be in the record.

Senator PEPPER. Thank you very much.

Mr. HUTCHINGS. I wish, Senator, you could picture yourself for a moment as a salaried worker employed by, shall we say, a large bank covered under the act and receiving, shall we say, $40 a week salary. Then at the behest of your employer you are requested to, and work, 60 hours in a week, rather than 40.

Now, as we generally conceive the wage and hour law, it provides time and a half for work in excess of 40 hours in a week, and you make a mental computation as a worker, and you figure that your additional 20 hours will therefore augment your normal salary by an amount of $30 gross for a total of $70 in that week, which would be at the rate of $1.50 on each of the other 20 hours, or $30 over your normal weekly salary.

When you get your pay check, however, instead of receiving a gross salary of $70 for your 60 hours of work during that week, you find that you have only been paid $46.66% for your 60 hours of work.

How come? There have been 20 more hours put in for which you received $6.66%. There must be something wrong somewhere, and there is. Certainly $6.66% could not be proper compensation for 20 hours of overtime.

Under the situation as it prevails at present, you have no redress. The bank has a legal right to pay you the $6.66% over your normal $40 salary for the additional 20 hours of work that you have worked in that week. Now, how is that brought about?

You ask yourself, well, I am covered under the Fair Labor Standards Act. Section 7 (a) of the act would appear to assure you of receiving additional compensation for all hours that you worked in excess of 40 at a rate not less than time and a half the regular rate at which you are employed, but then the question comes up, What is the regular rate at which you are employed? There we get to the nub of the problem.

We find that the Administrator of the Fair Labor Standards Act in interpretative bulletin No. 4 entitled "Maximum Hours and Overtime Compensation," which was issued originally in November of 1938, and then later revised in December 1939, July 1940, and November 1940, creates a method of overtime computation to apply in the case of salaried employees.

In that interpretative bulletin the Administrator draws a distinction between what he calls salaried employees on a regular schedule of hours, and salaried employees on an irregular or fluctuating hours basis. Then he deals in his bulletin with the suggested method of computing overtime for the salaried employees on a regular schedule of hours, and the method is the normal method.

In other words, a salaried employee at $40 weekly salary, working a 40-hour regular scheduled work week, would draw his overtime at the rate of time and a half $1 an hour, but in regard to the group of so-called irregular, fluctuating hourly salaried workers, he sets up an entirely different formula.

There he says that the total number of hours worked in a week. should be divided into the regular weekly salary in order to determine the hourly rate, and that one-half of such determined hourly rate should then be added to the weekly salary for each hour worked in such week in excess of 40 hours. Well, the result is obvious.

If you are a salaried employee covered under the statute, who is construed as working an irregular or fluctuating hourly schedule, you receive progressively less for each hour that you work in excess of 40 per week.

For example, a salaried worker on a weekly salary of $40 a week in which he works 40 hours would earn $1 per hour, which would be recognized in that week as his regular hourly rate of pay, but if that worker should work 60 hours during the following week, his regular rate of pay is construed under the Administrator's formula as being what you are paid when you divide 60 hours into the $40 salary, or an hourly figure of 66% cents.

The worker then receives in total compensation for such 60 hours of work, his regular salary of $40 plus one-half of this theoretical

hourly rate of 66% cents. That would be 33% cents for each of the additional 20 hours that he worked above 40.

That brings his total earnings to $46.66% for 60 hours of work. Senator PEPPER. Well now, how does the question of overtime arise at all, if the worker, as I thought was true by hypothesis, just gets so much a week without regard to the number of hours worked? Or is that the way the contract is put?

Mr. HUTCHINGS. We are not speaking now, Senator, of workers that are employed under contract. We are speaking of salaried workers who, by interpretative bulletin No. 4, might be construed as working an irregular schedule of hours.

In other words, we are not concerned here with the contract formula under the act. We are concerned with a method of determining what the rate is for a salaried worker who may be construed as working an irregular schedule of hours.

Senator PEPPER. Why does the question arise to determine what the hourly rate is?

Mr. HUTCHINGS. It arises when the worker is worked hours in excess of 40 per week, because then the employer must have a formula to arrive at the amount of compensation to pay such employee for the hours worked in excess of 40 per week.

Senator PEPPER. I see. Under the law you cannot just say, "I agree to give you $40 a week regardless of how many hours you work," because you have got to meet the requirements of the law. Mr. HUTCHINGS. That is right, section 7 (a).

Senator PEPPER. Anyone who works more than 40 hours gets time and a half for more than 40 hours.

Mr. HUTCHINGS. That is correct. It is time and a half of his regular rate, and the Administrator in interpretative bulletin No. 4 has set up, has created a formula for determining regular rate of a salaried worker whom he construes as working irregular or nonscheduled hours. Senator PEPPER. What is that formula?

Mr. HUTCHINGS. The formula is that you take the total number of hours worked by such employee in a week, divide it into the weekly salary.

Senator PEPPER. In any week or in an average week?

Mr. HUTCHINGS. In each week. In other words, if you work 60 hours in a week, you would be entitled under the statute to overtime for the hours in excess of 40 at your regular rate.

To determine your regular rate, the Administrator suggests you divide the 60 hours into the $40, which gives you a theoretical regular rate of 66 and two-thirds cents an hour.

Then his theory goes on a little farther. He construes that $40 as covering the 60 hours at straight time, so he suggests that the 66% cents be divided in two in order to get what half time would be, and add the half time onto the other 20 hours, but the result is that a salaried worker who, through no fault of his own, finds himself in this category, takes a beating every time he works overtime, and we are talking here, and the committee has before it, about a bill which would establish at least a 75-cents-per-hour minimum, but at the same time I cannot find in the bill where anything has been done, as it has been done in the House bill, H. R. 3190, to correct this situation.

Now in the House bill the problem has been recognized and specific language has been inserted in section 7 (c) to eliminate this coolie

overtime practice that exists among salaried workers, and incidentally, Senator, the largest banking enterprise in our country, the Bank of America, continues to compute overtime on this so-called coolie basis. The wording in the House bill is this:

And notwithstanding any other provision of this Section, any salaried employee who is employed in excess of 40 hours in any workweek shall be paid for each such hour in excess of 40, in addition to his salary for 40 hours of work, at a rate not less than one and one-half times the hourly rate obtained by dividing his weekly salary by not more than 40.

In other words, it puts him on the same basis as other salaried workers and as workers generally covered by the statute.

Senator PEPPER. Very well. Some other witnesses have emphasized that same point, at least one other witness, that it should be on the basis of 40 hours. The compensation received should be regarded on the basis of a workweek of 40 hours.

Mr. HUTCHINGS. That is correct, so that a maximum of 40 is your divisor rather than a divisor that varies in accordance with the stretched-out overtime hours that an individual employee works in an individual week at the request of his employer, so he is not put in a position of working at a continually diminishing rate, and then only getting half of that rate for his overtime hours above 40.

Senator PEPPER. So that if this 75-cent rate were in effect and that principle were in the law, the worker would have to get a minimum of $30 a week, and for each hour over 40 he would get time and a half at the rate of 75 cents an hour.

Mr. HUTCHINGS. That is correct, if his base rate was $30.

Senator PEPPER. He could not get less than $30 whatever the compensation was, and it would be regarded as being for a 40-hour workweek.

Mr. HUTCHINGS. That is right, he could not get less than time and a half 75 cents for his overtime hours, and he would get his true time and a half of his true rate, using the 40-hour devisor.

Senator PEPPER. Can you give us, Mr. Hutchings, any estimate as to the number of people who are affected by this matter?

Mr. HUTCHINGS. I cannot, Senator Pepper, I might suggest that the committee might ask the Wage and Hour Division for such information.

Frankly, I have been very much confused for years about just what is covered under this exemption. It seems to be a very elusive thing. I should not say exemption, but under this method of computation.

Who does the Administrator consider as an irregular scheduled hours worker? We have the largest banking enterprise in the country, and a banking enterprise is governed on opening and closing hours by State and Federal laws, and still it is apparently qualified to use this method of computation on its employees. How widespread it is, we do not know.

Senator PEPPER. Thank you very much, Mr. Hutchings. We are glad to have your clear statement.

Mr. SHROYER. Mr. Hutchings, do you think the Administrator's ruling was necessary on the basis of the present law?

Mr. HUTCHINGS. Well, that is interesting. That is an interesting question.

My own personal view-and I might be wrong on this-is that had the Administrator not made this type of distinguishing method of

computation in interpretative bulletin No. 4, I think he could have justified using a 40-hour divisor for salaried workers, and it was not necessary to do this; but having done it, and then getting into the Missel case, and coming into court when the employer was claiming the right to pay no overtime because the base salary exceeded the statutory minimum plus time and a half the statutory minimum, and using the formula from his own interpretative bulletin which he was more or less forced to use, as I see the picture in the court, it has given it the aspect of legality that I think can only be corrected by an insertion of wording in the statute along the line that the House has done in Mr. Lesinski's bill.

Thank you very much.

Senator PEPPER. Thank you very much, Mr. Hutchings. Your full statement will be incorporated in the record at this point.

(Mr. Hutchings submitted the following prepared statement:) STATEMENT BY PAUL R. HUTCHINGS, INTERNATIONAL PRESIDENT, OFFICE EMPLOYEES INTERNATIONAL UNION, A. F. of L.

I want to thank the committee for being given this opportunity to point out briefly the specific problem of overtime rates under the Fair Labor Standards Act as they relate to salaried employes who are presently construed as being employed on an irregularly scheduled hours basis. In the interest of brevity I will limit my remarks specifically to this one problem, which has come to be known as "Chinese" or "collie overtime."

I wish the members of this committee would picture themselves for a moment as salaried workers employed, shall we say, by a large bank covered under the act and receiving a regular weekly salary of, say, $40. Now assume that in a particular week, at the request of your employer, you work 60 hours rather than 40. The wage-and-hour law is generally thought of as providing for an overtime rate of time and one-half for hours worked in excess of 40 per week. A quick mental computation will lead you to the conclusion that your gross pay for such week will be $40 plus $1.50 for each of the 20 overtime hours you worked, or a total earnings for the week of $70. When you get your pay check, however, you find that instead of receiving $70 for your 60 hours of work you have been paid only $46.66% for 60 hours. How come? You know you draw a $40 salary in a week in which you work only 40 hours, and $6.66% certainly could not be proper compensation under the Fair Labor Standards Act for 20 hours of overtime. There must be something wrong somewhere. There is, but unfortunately you have no redress. The bank presently has a legal right to pay you only $6.66% over your normal $40 salary for the additional 20 hours which you worked in such week!

You may well ask "How is this possible when I am covered under the provisions of the Fair Labor Standards Act?" It is true that section 7 (a) of the act would appear to assure you of receiving additional compensation for all hours which you work in excess of 40 in a work week at a rate not less than one and one-half times the regular rate at which you are employed.

What is your regular rate? If you are a salary worker construed as being employed on an irregular or fluctuating hours basis, your regular rate is not determined by dividing your regular weekly salary by 40 hours in order to obtain your hourly rate and then paying you one and one-half times such hourly rate for each overtime hour. This method applies to other workers, but in your case an entirely different method is permitted. Administrative interpretation allows your employer to divide your total weekly hours of work into your weekly salary and then to pay you one half of such resultant hourly rate for each of the hours worked in excess of 40 hours. If your salary is $40 a week and you work 60 hours. your hourly rate becomes 66% cents and you receive half of this, or 33% cents for each hour of overtime. If you work 80 hours your regular rate becomes 50 cents and you receive half of this, or 25 cents for each hour of overtime. This discriminatory method of overtime compensation created by the Administrator of the act has come to be known as "Chinese" or "coolie overtime."

This name stems from the fact that under this method of overtime computation, the more hours you work in a given week, the less per hour you will receive for your services, and in no event will you get more than an additional one-half of such diminishing hourly rate for your overtime work.