Mr. Chairman, I would like to call on someone better versed on that particular phase than I. Mr. William A. Quinlan, our general counsel. He is better acquainted with that situation..

Mr. QUINLAN. Mr. Chairman, assuming the exemption has any validity at all I believe Mr. Smith's point concerning the 20 percent requirement is well taken and I believe that is the principle point he is trying to make. It would certainly cause confusion.

We had a great deal of confusion of that nature before the decision of the Supreme Court in Morris v. McComb. We think now the situation is clarified and we would hate to see it opened up again. Senator BALL. Was there any percentage?

Mr. QUINLAN. None established by the Court. They did not establish an arbitrary percentage rule. In that case only 3 or 4 percent were in interstate commerce but they were shared in by various drivers, so there would be difficulty in ascertaining which driver in which week. The Court held, in effect, that all drivers were subject to the ICC requirement and were under the exemption of 13 (b) (1). So, he was able to accord the same treatment to all the drivers.

Senator BALL. I think that could be cleared up. I suppose you want to avoid a loophole of having a driver exempt for one hour a week?

Mr. QUINLAN. In theory that might be possible but in practice I do not see it. The Commission has ruled that one trip a week in interstate commerce subjects the driver to the ICC regulations and, as I understand, the decision in Morris v. McComb all drivers are covered if they share in interstate operations throughout the year.

Senator BALL. I do not suppose we are so much concerned in that but only in seeing that it would apply to drivers and those who ride on the vehicles. I understand there is a question as to who else is exempt in the terminals. Most motor carriers have some employees covered by the act. Isn't that correct?

Mr. QUINLAN. That is true and, in the case of private carriers, engaged in other types of business beside truck operations they have other employees not in truck operations and they could not be covered. But it is pretty well settled that drivers, helpers, loaders and mechanics. are covered.

They held hearings some time ago and gave pretty exhaustive consideration to recommendations for regulations to cover these other three classes of employees but, to date, they have not published any final regulation. Possibly it is not the intent of the provision in S. 2386 that a driver must actually operate in interstate commerce for 20 percent of his time during the workweek. If not, I think the provision should be further clarified.

Senator BALL. It was our purpose to extend the exemption only to those employees who are actually affected by orders issued by the ICC and to cover the rest of the employees. I think the 20 percent driving time provision was simply so, otherwise if you put a man on a truck one hour a week he would be exempt.

Mr. QUINLAN. We hope that will be clarified, for just now it amounts to substantiating the position the Wage and Hour Division have taken. They have said he must operate in interstate commerce rather than in intrastate commerce for 50 percent of his time.

If it is only the intent to require that he be engaged in driving in interstate or intrastate commerce for that portion of the time that should be spelled out.

Senator BALL. O. K.

Mr. SMITH. We would also oppose extending the coverage of the act by including "activity affecting commerce," as some of the bills before you do. It is our thought that such extension of coverage would in effect abolish the distinction between interstate commerce and intrastate commerce, bringing on more confusion and the necessity of lengthy litigation in specific cases.

Finally, we respectfully urge the committee to give especially careful consideration to the dangers of delegating to the Administrator what may properly be the legislative function. For example, section 11 (d) (1) of the Fair Labor Standards Act as it would be amended by S. 2386 provides that—

(d) The Administrator shall have power to make, issue, amend and rescind (1) interpretative regulations defining and particularizing the terms and provisions of this act *

And section 15 provides that—

(a) It shall be unlawful for any person (1) to transport, offer for transportation, ship, deliver, or sell in commerce, or to ship, deliver, or sell with knowledge that shipment or delivery or sale thereof in commerce is intended, any goods in the production of which any employee was employed ** in violation * * * of the Administrator issued under * of any regulation * * section 11 (d) (2) to violate any of the provisions of any * * of the Administrator issued under * ** reglation ** section 11 (d)

*

*

*

And section 16 (a) provides that any person who willfully violates those provisions may be fined up to $10,000 or imprisoned for up to 6 months, or both.

Looking back over the history of the administration of this statute, this is a terrible power to place in the hands of the Wage and Hour Division and we are truly alarmed that it should even be proposed.

To summarize, we wish to suggest that the present time is one of high employment and high national income and inflation. This is not the time to legislate long-range mandatory wage levels. Increasing the minimum would most likely push up the entire wage structure and this would cancel out such advantages as may be gained.

If the skilled employee is given the consideration contemplated here then the semiskilled employee would have a right to expect that he would be given consideration even if he is above the minimum.

Senator BALL. May I say, the power given to the Administrator is limited. One of the main difficulties is the confusion that results. The Administrator now has no power to issue any binding interpretation although the Portal-to-Portal Act makes it a good-faith defense. But you never really know where you stand until you have gone to the courts, which seems to me a confusing position for many employers.

We felt if we put the responsibility on the Administrator to give due regard to custom and practice in the industry and to interpret this act in a practical fashion instead of a purely legalistic fashion as has been done, we would have some responsibility where we knew it was. We are now having a lot of court cases.

I do not see how the courts can define and particularize in the law all the complex situations of industry in the United States. It is too big a job. I am inclined to agree with you that on the past record of the Wage and Hour Division pushing the coverage to the limit legalistically rather than being practical about it, we have not had a satis

factory situation. I am in favor of putting the responsibility on some individual and if he goes haywire we can do something about it.

Mr. SMITH. Our people are apprehensive that the past performance of the Administrator does not speak that he is qualified to give the type of handling of the authority that would not have a lot of hazards added.

Senator BALL. You think it is better to finally let it rest with the courts?

Mr. SMITH. That seems to be working better now rather than delegating too much authority to one administrator. We are very appreensive of that on account of the past record.

Senator BALL. Thank you.

Mr. SMITH. Thank you very much.

Senator BALL. The next witness is Joseph T. King. Mr. King.

STATEMENT OF JOSEPH T. KING, NATIONAL RETAIL LUMBER DEALERS ASSOCIATION

Mr. KING. Mr. Chairman and members of the committee: I am representing the National Retail Lumber Dealers Association with offices at 1200 Eighteenth Street NW. This association is composed of retail lumber and building-material dealers located in practically every community in the United States. Over half of these 25,000 dealers are in ommunities having a population of less than 2,500 people and over three-quarters of them are in communities having a population of less than 25,000. The 1940 census shows that the total employment in this industry was 235,447 employees, or less than an average of 5.4 employees per yard.

I am quite sure that each of you are familiar with the functional nature of the retail lumber and building-material business. However, for the record it should be stated that the retail building-supply dealer is the final link in the chain of distribution of building materials. The service that the retail building-supply dealer performs in the local community is basically the same as that performed by the retail dry-goods store, grocery store, drug store, and hardware. In each instance the retail establishment buys from the manufacturer or wholesaler bulk quantities which are stored and displayed for sale in lesser quantities. In each instance the retailer must maintain a place of business at which the general public is welcome to examine the merchandise offered for sale. His stock of merchandise must cover a -ufficiently broad range of items to meet the requirements of the community. He must maintain sales facilities sufficient to provide personal attention depending on the needs of each customer whether he requires a 5-cent item or a thousand dollars worth of merchandise. He must maintain a sufficiently flexible credit service to meet the needs of his customers and of the community. He must maintain hours of business to serve the needs of his customers and be equipped to advise and assist his customers in the selection of commodities required to meet their needs.

Nearly all of the products sold by the building-supply dealer never leave the community. They are converted into farm buildings, churches, homes, stores, shops, roads, walks, sewers, and other local improvements. It is significant that the material sold by the retail

building supply dealer becomes a part of the realty of the local community and is no longer susceptible to movement in commerce.

In enacting the Fair Labor Standards Act of 1938 Congress exempted from the operation of sections 6 and 7 of the act

any employee engaged in any retail or service establishment the greater part of whose selling or servicing is in intrastate commerce ; *

Both the committee reports and the statements made on the floor by the sponsors of the legislation left no doubt but that Congress intended by this language to totally exempt employees engaged in retail establishments. The legislative history pertaining to the language exempting employees in retail establishments from the operations of the minimum-wage and maximum-hour provisions has been summarized and is attached as an appendix to my statement. I did not intend to read any part of that, but I would like to refer you to page 2 of the appendix for the comments that are contained there. After reviewing this legislative history and comparing it with the rulings of the Wage and Hour Administrator and the decisions of the courts, one cannot help but marvel at the mental gymnastics of the legal profession.

Possibly the best way to explain the situation as it now exists is to retrace the steps which were pursued by the Administrator and the courts in arriving at the conclusion which Congress never intended.

In order to bring an employee of a retail establishment under the provisions of sections 6 and 7 of the act it was necessary for the Administrator and the courts to establish first that the greater part of the selling or servicing of the establishment was in interstate commerce, and, secondly, that the retail establishment was not a retail establishment.

Obviously, the Administrator found that the number of retail establishments who sold a greater part of their commodities across State lines was almost insignificant. He therefore decided to interpret the language "the greater part of whose selling or servicing is in intrastate commerce" as modifying "employee" and not "establishment.' By this legalistic juggling he was able to conclude that many retail employees were engaged in commerce even though the retail establishment was not. This is true in our industry, because in the small rural yards where you have only two or three employees, each at one time or another engages in the unloading of carloads of commodities that have come across State lines.

With the employees engaged in commerce, the second problem was to eliminate the employee from the classification of being "engaged in a retail establishment," which obviously meant "employed" in a retail establishment. Winston, Funk & Wagnall, and Webster define "retail" as "the sale of goods in small quantities; opposite of wholesale; to sell in small quantities; or to sell directly to the consumer. This is probably what Congress intended, but that would not satisfy the ambitions of the Administrator. However, what the dictionary couldn't supply the economist could. The word "consumer" in economics means "one who devotes economic goods to the satisfaction of his present wants, and thus uses up the utilities in the goods so disposed of; loosely, one who buys a commodity for use rather than for resale; opposite of producer." This, the Administrator must have decided. was the Achilles' heel, for he then proceeded on the

premise that sales made by retail establishments to persons who were going to use the materials or commodities for the purpose of gain as distinguished from satisfying their own personal wants would be nonretail sales.

Thus, according to the Administrator, if a small-town grocer sold eggs to the next-door restaurant owner it was a nonretail sale because the restaurant owner was motivated by profit and did not consume the eggs himself. This concept has been applied to building materials, farm machinery, coal, hardware, dry goods, or any other commodity sold by retail establishments.

Now let's take a retail building-supply dealer in a farming community and see where this leads to. As pointed out previously, the small retail-lumber dealer has only two or three employees. With so few employees you cannot departmentalize. During the course of the year each one of the employees will spend anywhere from 15 to 30 percent of his time unloading shipments of commodities that have moved in interstate commerce. The Administrator has ruled-contrary to the intent of Congress-that an employee unloading commodities from a freight car is engaged in commerce. The courts, relying in part on what they refer to as the great weight to be given administrative rulings, have supported this position of the Administrator. See Walling v. Consumers Company, United States Circuit Court of Appeals, Seventh Circuit, decided March 22, 1945. In the Roland case the Administrator urged upon the Supreme Court the academic theory that a sale to a consumer who had a profit motive was not a retail sale, and the court by way of dicta indicated some acceptance of this theory. If the Administrator is correct in his analysis of what constitutes a retail sale, then a sale of lumber to a farmer for the construction of farm buildings is a nonretail sale because the farmer is motivated by profit. If this is true, the employees of nearly every retail buildingsupply dealer in the farming communities are subject to the act because more than 25 percent of his sales are to this type of consumer. If retail sales are to be confined to those sales which are made to satisfy the personal needs of the buyer and sales to persons motivated by profit or business consideration are to be classified as nonretail, we arrive at some very strange results. For example, if prospective home owner X buys material to build a home, it is a retail sale.

If, however, Y, a builder, buys material and builds an identical house and then sells the house to the same Mr. X, the sale of the building material is classified as nonretail.

Again, if X buys a pair of pliers from a retail hardware store for use around the house, it is a retail sale. If, however, the same X buys the same pair of pliers for use around his commercial garage, it is a nonretail sale.

Again, if X buys a tire for his pleasure automobile it is a retail sale, but it would be a nonretail sale if the automobile is used for business more than it is used for pleasure.

Now the Administrator will tell you that under his current interpretations a small quantity sale of this kind does not have to be classified as a nonretail sale. I want to invite the committee's attention to the fact that this interpretation of the Administrator is subject to change at the discretion of the Administrator. As a matter of fact, such sales under a previous interpretation of the Administrator had to be com