Fixed assets (net after charges to expense for depreciation on buildings, machinery and equipment).

A study of this composite balance sheet clearly illustrates the impossibility of a laundry absorbing any sizable retroactive payments for overtime and penalties even for a 2-year period if such a laundry suddenly should find itself by decree of the Administrator to be under the act.

SUMMARY

Laundries located near State lines, with wartime shortages of labor, supplies, gasoline, and machinery, and with prices fixed in many cases at a 1934 to 1936 level, can be made bankrupt by suits for back pay. A reasonable statute of limitation to protect laundries and other business enterprises from what has been well-termed "hidden bankruptcy" is most important.

It is estimated that nearly 850 laundries have become wartime business casualties since December 7, 1941. This number of casualties will be swelled appreciably by any future court order that requires sizable retroactive pay on the part of local laundries, which for years have been operating under the assumption that they were subject to their State minimum-wage and maximum-hour provisions and not to the Federal statute.

In my opinion, this statute of limitations should be for a period not exceeding 1 year unless a shorter period is specified by a State law. Unless a laundry that later may be held subject to the Wages and Hours Act could secure a loan, it would be forced to liquidate its assets in most cases to meet such an order. Mr. GWYNNE. Mr. Chairman, there are a number of witnesses who have given me their names, indicating that they wish to appear. I wonder if it is possible to fix a time now for a future hearing while they are here.

Mr. FEIGHAN. We will resume these hearings at 10 o'clock on Wednesday morning.

(Whereupon, at 12:05 p. m., the committee adjourned to Wednesday, June 13, 1945, at 10 a. m.)

LIMITING THE TIME FOR BRINGING CERTAIN ACTIONS UNDER THE LAWS OF THE UNITED STATES

WEDNESDAY, JUNE 13, 1945

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C. The hearing was called to order at 10 a. m., Hon. Michael Feighan of Ohio (chairman of the subcommittee) presiding.

Mr. FEIGHAN. The subcommittee will come to order.

Mr. SPRINGER. Mr. Chairman, I have a statement from Mr. W. R. Sanborn, president of the Lehigh Stone Co., Kankakee, Ill., which was sent to me, and he asked that the statement be incorporated and be made a part of the record, and if there is no objection I would like to have it incorporated herein.

Mr. FEIGHAN. We will be glad to include that in the record. (The statement referred to is as follows:)

STATEMENT OF W. R. SANBORN, PRESIDENT, LEHIGH STONE CO., KANKAKEE, ILL.

Gentlemen of this committee, on behalf of Lehigh Stone Co., a small business, home-owned Illinois corporation, producing crushed store, rip rap, and agricultural limestone, I wish to make a brief statement in support of Congressman Gwynne's bill, H. R. 2788.

This legislation is something that is very urgently needed to assist the employes of this country in providing jobs for returning veterans. A failure to enact this act will result in the inevitable bankruptcy of many present employers, who have depended upon the various rulings and orders issued by Mr. L. Metcalfe Walling, Administrator of the Wage and Hour Division, to determine the employer's status under the Fair Labor Standards Act. Ever since 1938, when the Wages and Hours Act became effective, employers have carefully followed all administrative regulations and rulings, that they might comply with the act in every respect. It was clear that the act had teeth in it. Employers had no desire to be found in violation.

As months passed, it became evident that the Wage and Hour Division was steadily changing the old-time concept of what constituted "interstate commerce." Employers offered no opposition to the ever broadened definition of "commerce." They promptly complied with ever-increasing demands of each new ruling. The purpose of employers was to comply with the act, regardless of how often new rulings broadened its scope.

May 15, 1941, some 21⁄2 years after the act became effective, the Wage and Hour Division issued Release G-162, which immediately became the guide to thousands of employers throughout the United States to determine whether or not they were covered by the act, as it defined "interstate commerce."

I quote from section 6 of release G-162, but I streamline the quotation to emphasize the central idea:

"Employees-producing-sand, gravel-macadam-used solely within the State in the construction, maintenance, repair or reconstruction of essential instrumentalities of Commerce do not become subject to the act merely by reason of the use to which such products are put."

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Please note that last phrase. It then required something more than the use to which products were put, to determine the status of the producer of the product. For nearly 4 years that ruling enabled employers engaged in processing sand, gravel, and crushed stone to determine their position under the act. Those commodities are low priced, heavy loading, and the market is so highly competitive, that shipments are generally restricted to a very small transportation radius, usually within the borders of the State in which they are produced. Consequently many employers were not in interstate commerce as defined at that time by Mr. Walling, and they conducted their affairs accordingly.

The country's large corporations were probably all in Interstate Commerce even as it was defined in 1938. It is the thousands of small business industries, doing. business in a small radius, who were excluded from Interstate Commerce by the rules of the Wage-Hour Division issued in 1941.

Within the past few months, the Wage-Hour Division, and some of our courts, have made revolutionary changes in their concept of what constitutes interstate

commerce.

March 13, 1945, the Wage-Hour Division issued release A-14, in which it announced a much more inclusive definition of Interstate Commerce, to make it include almost every producer of sand, gravel and crushed stone, who had theretofore been excluded. The central thought of that new ruling is as follows:

"Goods are produced for commerce even though they do not subsequently leave the State, if they are produced in order to supply the needs of Interstate Commerce or to aid or facilitate the carrying on of Interstate Commerce by essential-facilities-such as interstate railroads, highways-and the like." Any less inclusive interpretation, to be found in section 6 of release G-162, was to be modified by this newer decision.

Again, in response to a direct question as to whether the production and distribution of agricultural limestone used within the State is in commerce, the Wage-Hour Division recently ruled that agricultural limestone "would appear to be one of the several proximate causes of vegetable growth," and was therefore "within the principles of the Kirschbaum and the Salt River Valley decisions." So its production then became "an occupation necessary to production within the meaning of the act."

As recently as April 10, 1945, in response to an inquiry, the Wage-Hour Division issued a special opinion, which I quote, in part:

"To allay any misapprehension that may continue to exist among the members of your association, I deem it advisable to send you this written summary of the principles followed by the Division in its enforcement of the act."

Then follows some examples, based upon both G-162 and A-14, with this conclusion:

"To the extent that the above statement-may reflect a broader view of coverage, than has previously been expressed in our opinions given to your association, those opinions are modified accordingly, but the Division will not bring enforcement action based on this broader view of coverage, with respect to violations prior to April 15, 1945."

However, please note carefully that this generous gesture by the Wage-Hour Division, does not nullify the right of employees under section 16 (B) of the act to maintain their own suits to recover compensation, which courts might decide was due them, even though the basis for such a suit was only made possible by a change of ruling by the Wage-Hour Division, while the employer had carefully and completely observed every ruling of the Division as fast as such rulings were issued.

If these drastic and revolutionary interpretations are upheld by the courts, they should not be permitted to apply retroactively. If these broadened interpretations are permitted to be used as a basis for action against an employer, thousands of small business enterprises are going to find themselves liable for penalties that could easily put them out of business. The aggregate of all the small stone quarries and gravel pits in this country provide employment for a vast army of men. They are all short-handed at present, and will provide employment for many returning veterans, if these industries are permitted to live. As we understand the Gwynne bill, it would provide a statute of limitation, to protect the employer against the retroactive application of these revolutionary rulings by the Wage-Hour Division.

Under our Constitution and system of laws, employers are entitled to the protection offered in Congressman Gwynne's H. R. 2788. We urge its immediate enactment.

Mr. FEIGHAN. Also, I have a statement from Mr. Wasielewski, Member of Congress from Wisconsin. I would like to have his statement included, as well as the statement by Mr. William L. Mallon, president of National Automobile Dealers' Association.

STATEMENT OF HON. THAD F. WASIELEWSKI, REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Mr. CHAIRMAN. Today with the multifarious Government agencies and their regulations exercising all sorts of controls over individuals and business and industry, it is well nigh impossible to carry on any sort of legitimate activity without running into conflict with one of them.

The bill before your committee, H. R. 2788, is designed to establish a statute of limitations on civil liability under the wage and hours law. Such legislation apparently is essential to the protection of employers throughout the Nation.

Under the present act an employee may, many years after he has severed all connections with an employer, bring action for alleged violations and back pay. This keeps an employer in constant jeopardy. Some of these actions practically take on the color of blackmail. Unless there is a change in the law the accumulations in some instances may virtually bankrupt many smaller enterprises.

Notwithstanding the greatest good faith on the part of an employer to comply with the rules and regulations of these various agencies and commissions, technical violations are bound to arise and pyramid over a number of years and cause dire consequences. Placing a period of limitation cannot prejudice the right of any employee who has a legitimate claim.

STATEMENT OF WILLIAM L. MALLON, PRESIDENT OF NATIONAL AUTOMOBILE DEALERS ASSOCIATION

Mr. MALLON. My name is William L. Mallon, and I am an automobile dealer from Newark, N. J. I am a director and president of National Automobile Dealers Association, which represents the automobile dealers of America who hold franchises for the sale of new automobiles. On behalf of this association, I enter an appearance in support of H. R. 2788.

One of the acts which will be affected by the proposed bill is the Fair Labor Standards Act. Undoubtedly this art is the most important to the retail automobile dealers of all of the laws which will be governed by the proposed bill, and my comments are, therefore, being directed particularly to the wage-and-hour law and the need for the statute of limitations as provided by this bill.

The present provisions of the Fair Labor Standards Act do not contain a period of limitation within which actions must be commenced by an employee for minimum wages, overtime compensation, and liquidated damages. The lack of such a provision has created many uncertainties for the members of this association sinc the passage of the act in 1938. It has become apparent through judicial decisions that the various State statutes of limitations govern the claims for wages under the act. But, up to the present, the courts in only a

relatively small number of States have determined which of their particular State statutes are applicable. For example, it was not until August 14, 1944, through a decision of the Federal district court, that dealers of the State of Maryland were informed that it was the 12-year statute of limitation of Maryland which would control Federal wage-and-hour cases. Steps were taken to have this law amended reducing the period of limitation by 9 years.

The members of this association generally have considered their businesses to be exempt from the act under the provisions of section 13 (a) (2), which exempts retail establishments."

The character of the automobile retail business has undergone considerable disruption during the war years, due principally to the stoppage in the production of new automobiles. This has changed the relative percentages of the various types of sales going to make up a dealer's gross volume, and has thus thrown out of proportion, in some instances, his so-called nonretail sales. Any slight change in the nature of the dealer's business may cause him to lose the re tail exemption under present interpretations of the Administrator. All this creates a great deal of uncertainty in the trade, but which could, in part, be relieved by the adoption of the period of limitations for actions arising under this law in accordance with the pro visions of this bill. In connection with this question of uncertain coverage, the dissenting justices in the case of Brooklyn Savings Bank v. O'Neal, decided by the United States Supreme Court on April 9, 1945, said:

In view of the uncertain coverage of the act, we cannot ignore the fact that the statutory liability may be harsh in its application and enable the employee to recover an amount far in excess of any damages he has, in fact, suffered.

The application in all phases of a Federal law ought to be universal in its scope. There is no logical reason why dealers in the State of Maryland should have been subject to a longer period of limitation than the dealers of other States when the privileges and obligations are fixed and arise out of a Federal statute. The same unfairness exists when applied to the employee. The purpose of the Fair Labor Standards Act was to raise the standards of living generally throughout the country, and the law covers all employees who fall within the scope of its provisions regardless of their place of residence. This purpose is defeated, however, as a practical matter by the varying periods provided by the State statutes of limitations within which employees may pursue their remedies. This results in a lack of uniformity and unequal remedy.

The Administrator of the Wage and Hour Division has taken cognizance of this particular situation from time to time in his annual report and in other writings.

In all probability members of this association will be affected by the provisions of the Surplus Property Act, for which this bill will also fix a statute of limitations, because dealers are engaged to a certain extent in handling surplus automotive units and equipment.

In the interest of certainty, uniformity, and justice, Congress should provide a reasonable statute of limitations. The periods of limitation provided in H. R. 2788 are reasonable periods and permit ample time for all persons concerned in a controversy to ascertain and pursue their remedies.