mind when, in an address in the House on March 28, 1945, he said that

employers are finding themselves liable for damages, doubled, for events which were lawful when they occurred but unlawful in retrospect.

Now, an indicat on of the attitude sometimes taken by courts when dealing with overtime wage suits is afforded in a decision of the New York Supreme Court in Caperna v. Williams-Bauer Corp., et al., reported in 8 Wage-Hour Regulation 247 (issue of March 5, 1945). Caperna sued under the Fair Labor Standards Act for overtime compensation for work claimed to have been done between October 1938 and February 1942.

According to the court, Caperna's proof consisted solely of his recollection as to the number of hours of alleged overtime work. He kept no records whatever. In dealing with this kind of evidence the court said:

* * *

*

*

* * * it is not essential that plaintiff prove his damage with mathematical precision memory evidence is both competent and admissible the extent of credence and the weight and effect to be given to such evidence in balancing the testimony by any witness against opposing testimony is for the trier of the facts * * *.

Now, the verdict of the jury rendered in this case was set aside by the court but on grounds that have no relation to the principle of law laid down.

We believe that decisions of the kind involved in the Caperna case constitute another reason why Congress should put on the statute books a reasonable period of limitation for bringing wage suits.

Telephone companies place too high a value upon good employee relations and good public relations generally to be guilty of any intention to withhold wages that are due. As semipublic enterprises, telephone companies are sensitive of their standing in the community.

Knowledge comes to us from time to time, however, of claims for back wages presented by employees on the basis of new interpretations of the law, or the regulations, or of lack of knowledge on the part of. the employer of his obligations under the law. The good faith of the company may not necessarily be involved at all. As demonstrating the burden which these claims impose upon small independent companies from time to time, I would now like to instance several cases that have come to my attention.

One of our telephone exchanges operating in a very small town and having only 138 telephones, gross operating revenues of $3,334, and annual operating expenses of $2,420; settled a claim made against it for $2,400-this amount including the double-payment penalty in the form of liquidated damages and attorney's fees. This settlement took 72 percent of this little exchange's operating revenues for 1 year. The claim extended back several years. Another one of our exchanges operates 388 telephones. Its gross operating revenues are $12,362, and its operating expenses $7,809. It paid a claim amounting to $1,060.

Another exchange operates 632 telephones. It has an investment in its plant of $74,467, operating revenues of $18,885, and operating expenses of $14,360. It was compelled to pay back wages in the amount of $3,538.

Another exchange operates 560 telephones, with a plant investment of $43,222, operating revenues of $11,405, and operating expenses of $9,029. It was subjected to a claim of $4,638.

Those amounts, paid out as wage claims, are sizable sums for our small independent telephone companies. In terms of percentage of investment or gross revenues they would be burdensome to almost any size of business.

It is reasonable to assume that in some of these cases neither the employer nor the employees had any notion whatever that the work involved was not being compensated adequately and in accordance with the law at the time it was performed.

Mr. FEIGHAN. Those claims which you just referred to, and were paid, did they extend back over a considerable period of time?

Mr. BAILEY. Yes, they did. Of course, it couldn't extend beyond 7 years because the statute has only been on the books for that period of time.

Employers generally maintain reserves of one kind and another with which to meet various kinds of anticipated expenses, but they do not ordinarily set up reserves for the purpose of meeting such contingent liabilities as may exist in the case of possible back wage claims. Wages are something an employer pays currently.

Now, most of the 6,000 plus independent telephone companies are very small ones. Thus we are small business in a very real sense. Το have wage claims asserted against these small employers running way back to the year of enactment of the Fair Labor Standards Act, 1938, with the present double payment requirement and with attorneys' fees assessed, might well result in bankruptcy to some of them. Members of Congress are, of course, aware that in 1939 the independent telephone industry was given a partial exemption from the wage and hour requirements of the statute. This exemption applied, however, only to switchboard operators at exchanges having 500 or less stations. All other employees at such exchanges, and all employees at all other exchanges, are fully subject to the act.

.

The inequity involved in the absence of a reasonable Federal statute of limitations to govern the bringing of wage suits is further illustrated by the fact that a release obtained by an employer from an employee for claimed back wages apparently is not worth the paper it is written on if the employee chooses to disregard it. This was made clear by the United States Supreme Court on April 10, 1945, in a case entitled Brooklyn Savings Bank v. O'Neil. In this case the court in a 6 to 3 decision ruled that a release obtained from an employee in settlement of a wage claim does not bar a later suit by the employee under the Fair Labor Standards Act.

Now, the reasoning of the Court in that case was that it was the intention of Congress to protect certain groups from substandard wages and excessive hours and that when Congress grants a private right of action in order to effectuate a legislative policy, waiver of an employer's obligation "will not be allowed where it would thwart the legislative policy." It is certainly not the legislative policy to encourage litigation but that is one of the effects of the law under the decision of the Court I have just referred to.

mind when, in an address in the House on March 28, 1945, he said. that

employers are finding themselves liable for damages, doubled, for events which were lawful when they occurred but unlawful in retrospect.

Now, an indicat`on of the attitude sometimes taken by courts when dealing with overtime wage suits is afforded in a decision of the New York Supreme Court in Caperna v. Williams-Bauer Corp., et al., reported in 8 Wage-Hour Regulation 247 (issue of March 5, 1945). Caperna sued under the Fair Labor Standards Act for overtime compensation for work claimed to have been done between October 1938 and February 1942.

According to the court, Caperna's proof consisted solely of his recollection as to the number of hours of alleged overtime work. He kept no records whatever. In dealing with this kind of evidence the court said:

precision

*

*

*

it is not essential that plaintiff prove his damage with mathematical memory evidence is both competent and admissible * * * the extent of credence and the weight and effect to be given to such evidence in balancing the testimony by any witness against opposing testimony is * for the trier of the facts * *

Now, the verdict of the jury rendered in this case was set aside by the court but on grounds that have no relation to the principle of law laid down.

We believe that decisions of the kind involved in the Caperna case constitute another reason why Congress should put on the statute books a reasonable period of limitation for bringing wage suits.

Telephone companies place too high a value upon good employee relations and good public relations generally to be guilty of any intention to withhold wages that are due. As semipublic enterprises, telephone companies are sensitive of their standing in the community.

Knowledge comes to us from time to time, however, of claims for back wages presented by employees on the basis of new interpretations of the law, or the regulations, or of lack of knowledge on the part of the employer of his obligations under the law. The good faith of the company may not necessarily be involved at all. As demonstrating the burden which these claims impose upon small independent companies from time to time, I would now like to instance several cases that have come to my attention,

One of our telephone exchanges operating in a very small town and having only 138 telephones, gross operating revenues of $3.334, and annual operating expenses of $2,420, settled a claim made against it for $2,400-this amount including the double-payment penalty in the form of liquidated damages and attorney's fees. This settlement took 72 percent of this little exchange's operating revenues for 1 year. The claim extended back several years.

Another one of our exchanges operates 388 telephones. Its gross operating revenues are $12362, and its operating expenses $7.509. It paid a claim amounting to $1,060.

Another exchange operates 632 telephones. It has an investment in its plant of $74,467, operating revenues of $18,585, and operating expenses of $14,360. It was compelled to pay back wages in the amount of $3.538.

Another exchange operates 560 telephones, with a plant investment of $43,222, operating revenues of $11,405, and operating expenses of $9,029. It was subjected to a claim of $4,638.

Those amounts, paid out as wage claims, are sizable sums for our small independent telephone companies. In terms of percentage of investment or gross revenues they would be burdensome to almost any size of business.

It is reasonable to assume that in some of these cases neither the employer nor the employees had any notion whatever that the work involved was not being compensated adequately and in accordance with the law at the time it was performed.

Mr. FEIGHAN. Those claims which you just referred to, and were paid, did they extend back over a considerable period of time?

Mr. BAILEY. Yes, they did. Of course, it couldn't extend beyond 7 years because the statute has only been on the books for that period of time.

Employers generally maintain reserves of one kind and another with which to meet various kinds of anticipated expenses, but they do not ordinarily set up reserves for the purpose of meeting such contingent liabilities as may exist in the case of possible back wage claims. Wages are something an employer pays currently.

To

Now, most of the 6,000 plus independent telephone companies are very small ones. Thus we are small business in a very real sense. have wage claims asserted against these small employers running way back to the year of enactment of the Fair Labor Standards Act, 1938, with the present double payment requirement and with attorneys' fees assessed, might well result in bankruptcy to some of them. Members of Congress are, of course, aware that in 1939 the independent telephone industry was given a partial exemption from the wage and hour requirements of the statute. This exemption applied, however, only to switchboard operators at exchanges having 500 or less stations. All other employees at such exchanges, and all employees at all other exchanges, are fully subject to the act.

The inequity involved in the absence of a reasonable Federal statute of limitations to govern the bringing of wage suits is further illustrated by the fact that a release obtained by an employer from an employee for claimed back wages apparently is not worth the paper it is written on if the employee chooses to disregard it. This was made clear by the United States Supreme Court on April 10, 1945, in a case entitled Brooklyn Savings Bank v. O'Neil. In this case the court in a 6 to 3 decision ruled that a release obtained from an employee in settlement of a wage claim does not bar a later suit by the employee under the Fair Labor Standards Act.

Now, the reasoning of the Court in that case was that it was the intention of Congress to protect certain groups from substandard wages and excessive hours and that when Congress grants a private right of action in order to effectuate a legislative policy, waiver of an employer's obligation "will not be allowed where it would thwart the legislative policy." It is certainly not the legislative policy to encourage litigation but that is one of the effects of the law under the decision of the Court I have just referred to.

Now, there is one further aspect of the problem under discussion to which perhaps reference should be made. We hope the members of the committee will not think it is too far afield.

Although the dial method of telephone operation came into being over 40 years ago, less than 20 percent of independent telephones are now dial operated. Independent companies have operated in the main on a manual basis. In the Bell System over 60 percent of the telephones are dial. It may be asserted that conversion to dial even among independent companies operating in the small towns and rural areas is an inevitable technological development and that eventually our companies generally will come to it, regardless of wage conditions or wage problems. This is doubtless true. But it is also true that the drift toward mechanization in providing telephone service is increased by such burdens as presently flow from lack of a prescribed time within which to bring suits for back wages, with the trimmings permitted by section 16b of the Wages and Hours Act. More and more within the industry we hear the expression, "We've got to mechanize." "We've got to mechanize." Bear in mind that when you go to dial operation you begin to destroy certain opportunities for employment. It is in the interest of the employees themselves that business be given an opportunity to function and remain in business. Now, I think it is appropriate to add that a reasonable statute of limitations governing the bringing of wage suits is not hostile to the interest of the employee. It may on the contrary very well be to his advantage for the reason that it will cause him to be more alert to the conditions of his employment, and will also cause him to bring his suit while his evidence is fresh and his witnesses are still available, and thus increase the chances of success in his litigation.

Now, Mr. Chairman, last month I wrote an article, in the nature of a brief, entitled "The Need for Legislation to Provide a Period of Limitation for Bringing Wage Suits under the Fair Labor Standards Act." I have already distributed copies by mail to the members of this committee. I don't know whether you have gotten around to look at yours, but if the chairman thinks it worth while, I should be very glad if it could be made a part of this proceeding for the record. (The matter referred to is as follows:)

THE NEED FOR LEGISLATION TO PROVIDE A PERIOD OF LIMITATION FOR BRINGING WAGE SUITS UNDER THE FAIR LABOR STANDARDS ACT

GENERAL STATEMENT

The United States Independent Telephone Association, with headquarters in Washington, D. C., is the trade organization which represents that branch of the telephone industry usually referred to as the "independents."

There are approximately 6.200 independent telephone companies which furnish telephone service in 12,000 cities and towns throughout the United States. The Bell System operates in only 7,000 communities, but its companies provide service in the large metropolitan cities.

Of a total of 24,850,000 telephones in the United States, approximately 4,800,000, or 20 percent, are serviced by the independents. Independent telephone companies operate principally in the smaller communities and in the rural areas. It has been estimated that these companies serve about 70 percent of the area of the country. They employ approximately 72,000 people.

The 8-page pamphlet attached to this statement will furnish additional evidence concerning the independent telephone industry. The black dots on the map in the middle of the pamphlet accurately locate the 12,000 exchanges operated by our companies.