Mr. WEISS. Yes. For minimum wages.

Senator BALL. What are the average wages of seamen? What is the going rate? Is there any effectual showing that they should have this protection?

Mr. WEISS. As of today most oceangoing seamen are above it. They were below these levels as recently as 2 or 3 years ago. The effect, of course, would be to protect the wages' going below the minimum level. It affects the future.

5. Motor-carrier employees: Another defect in the Fair Labor Standards Act which is urgently in need of correction is the overtime exemption for motor-carrier employees now contained in section 13 (b) (1) of the act. At the present time, the exemption is applicable to all employees for whom the Interstate Commerce Commission has authority to regulate hours of service pursuant to the provisions of the Motor Carriers Act of 1935. Under this provision the Interstate Commerce Commission has asserted jurisdiction over some half million employees but has actually fixed hours of service for drivers only, leaving a large group of employees in a sort of no-man's land: protected neither by the Fair Labor Standards Act nor by regulations issued by the Interstate Commerce Commission. Those employees include drivers' helpers, mechanics, and loaders.

Both S. 2386 and S. 2062 attempt to eliminate this defect, and I believe that a combination of the provisions proposed in these two bills would most adequately and effectively serve this purpose. S. 2386 limits the exemption to drivers, helpers, and others who ride on motor vehicles, which seems to me to form a logical basis for the exemption if one is to be retained. However, the bill permits the exemption to apply even if only a minor portion of the employee's time is spent on motor vehicles and, therefore, permits evasion of its intent by assigning inside employees to work on trucks for 1 day a week. Because of this defect, I believe the 50-percent test proposed in S. 2062 should be adopted.

Professor Cox. When you said that may be done as a means of evasion, did you take into consideration the Interstate Commerce Commission regulation?

Mr. WEISS. I don't know what you mean.

You

Professor Cox. I understand it would prevent that. Drivers have to meet all kinds of qualifications under the ICC regulations. cannot put a driver or helper in a position to avoid the regulations. Mr. WEISS. I believe they have to meet certain requirements. Mr. NYSTROM. I think he is pointing out that they would have to meet qualifications for the men as well as the hours of the drivers.

Senator BALL. It seems to me an employer seeking to evade on that basis would not have enough interest to warrant the effort. It complicates the employer's books tremendously and the universal complaint I get is that the overhead costs involved in keeping all the records involved are one major item in opposition to some of the rules they run into.

We were trying to make it clear that an employer would know where he stood on this thing so it would not be one of those hazy things like the regular rate of pay which winds up in the courts.

Mr. NYSTROM. The only difference is, your bill suggests that if a man spends 20 percent of his time on a motor vehicle he is exempt.

The Administrator suggests that this be raised to 50 percent to prevent the possibilities of abuse.

Senator BALL. Go ahead.

Mr. WEISS. Continuing Mr. McComb's statement :

6. Regular rate of pay: It is my opinion that the term "regular rate" needs legislative clarification. If this legislative clarification. were made along sound lines, I believe that it would eliminate the most troublesome difficulties which I have encountered since I became Administrator of the Fair Labor Standards Act. These difficulties arise from the fact that the original legislation did not define the term "regular rate"; nor did it grant the administrator authority to define this term through regulations. At a result, the definition of the term was left to a long line of court decisions, some of which have created difficulties for both management and labor. These difficulties relate to such matters as bona fide profit sharing plans, payments by employers into trust funds for the purpose of providing old-age pensions or other types of benefits, bona fide penalty payments for work outside the normal workday or work week.

This is not an easy problem to deal with because of the very serious possibility that the correction of legitimate problems might lead to a ready means for evading the overtime requirements of the act. If I seem unduly critical of S. 2386 in its attempt to deal with this problem, it is not because I don't recognize the difficulties involved. It is a problem for which we have long been seeking a solution and I hope to have available soon a draft of an amendment which I believe will solve our regular rate of pay problems in a more satisfactory manner than that proposed in S. 2386.

Senator BALL. How soon?

Mr. McCOMB. That is the problem. We are working on it. It is very complicated.

Senator BALL. And you have been working on it for some time.

Mr. McCOMB. Yes, but we think we can get you something that will work better than this.

Mr. WEISS. Mr. McComb's statement continues:

S. 2386 attempts to deal with the problems concerning regular rate of pay in several ways. First of all, it outlines the methods to be used in calculating the rate of pay under different circumstances. The general rule appears to be that contained in the first paragraph of section 3 (n) (1). This rule does not appear to provide for payment on the basis of time and one-half the piece rate, and possibly for other methods of compensation which have been held to be valid under the existing law.

We have had very little difficulty in determining how the regular rate of pay is to be calculated once the questions of inclusion and exclusion have been determined. Nor do I think that labor and management have had any substantial difficulties in this regard.

The only substantial problem that I am aware of concerns the method to be used when an employee works at two different rates during the same work week, a problem which is dealt with in section 3 (n) (4) of the bill. On the assumption that the Administration could deal with this type of problem under a rule making authority, I do not see the necessity for specifying in the statute the various permissible methods for calculating the regular rate of pay.

S. 2386 then goes on to indicate what is to be included in the normal straight time compensation, what is to be excluded and credited to overtime compensation for the purposes of section 7, and what is to be excluded from the normal straight-time compensation but not to be credited to overtime compensation. The items specifically mentioned are, generally speaking, in accord with the present position of the divisions. However, production bonuses and other incentive payments are included in regular rate of pay only if they are determined "without reference to the profits of the enterprise." This last phrase seems to me unfortunate since it is possible that some reference to profits may be made in the course of discussions of bonuses or even as a condition for receiving a production type bonus. It seems to me that all production bonuses and other type of incentive payments which are directly related to the production or efficiency of an employee or group of employees should be included in the regular rate of pay.

Professor Cox. Would you go so far as to include a bonus of the type given by the Lincoln Electric where efficiency is taken into account in determining the annual bonus which is in addition to the share of profits?

Mr. WEISS. We have been trying to read up on that. We have found no precise method of ascertaining that bonus. It is rather an arbitrary decision of management. Even where is amounts to half the employee's earnings it is not related directly to profits but it is an arbitrary bonus determined by management.

Senator BALL. As I recall, they determine how much of the profits they will distribute first. Then they have several factors on which to determine the individual employee's share, one being his production record. But there is also his originality and application and new ideas he has proposed and his immediate supervisor's evaluation of his value to the whole enterprise.

Mr. WEISS. It is unlike any other bonus and is a peculiar kind of an animal.

Senator BALL. You do point out "without reference to the profits of the enterprise." But in distributing the profits would you go so far as to say the employer could not take into consideration efficiency? Mr. WEISS. I think the Administrator suggested that a bona fide bonus should be eliminated from the regular rate of pay.

Senator BALL. Even if efficiency is the consideration?

Mr. WEISS. Where the bonus is directly measured by efficiency that is not a profit-sharing type of bonus. In this Lincoln Electric case I could not comment on it without knowing more than the literature gives.

Senator BALL. It is a pretty effective type of bonus and it would seem wise to encourage it. But if it is to be subject to a retroactive levy for overtime pay these businesses will not adopt it but will encourage profit sharing and other means. We are trying to spell it out so clearly in this act that there will be no possible alibi for that kind of hairsplitting.

Mr. WEISS. I think you will find that the people who are sponsoring profit-sharing bonuses would not approve of the Lincoln Electric system.

Senator BALL. I don't care whether they approve it or not.

The record of the Lincoln Electric is clear. They have increased the income of their employees. They have cut their prices and increased

profits. I would like to see a great many American firms duplicate that performance.

Mr. McCOMB. I have said that in a great many instances.
Senator BALL. The management will eliminate

Mг. MCCOMB. But we have to guard against this: If it is tied in with production then the Administrator must have power to deal with it. We might say, You pay a large bonus-and if you pay onethird

Senator BALL. Where you have a real profit-sharing bonus system in effect the employees generally do not need the protection of this act and it is just a convenient peg for lawyers to hang some suits on. I would like to lean over backward to be sure I was exempting every genuine profit-sharing scheme.

Mr. MCCOMB. In many of our problems the unions say they would like to have that bonus excluded but we could not because of court decisions.

Professor Cox. We have taken care of that.

Mr. WEISS. We would like to take care of it in a different way.
Senator BALL. We would like to see your language.

Mr. WEISS. To resume Mr. McComb's presentation:

Cost of living bonuses are not mentioned in the list of items which must be included in normal straight-time compensation and, if this approach is to be used, it should certainly be included.

Two major items are listed which are not to be included in straighttime compensation and which are to be credited to overtime compensation for the purposes of section 7. The principal defect here is the failure to distinguish clearly between true overtime premium payments and shifts differentials. A partial solution to this problem would be to require that the overtime premiums referred to in this part of the definition must be at the rate of not less than one and one-half times the regular rate of pay.

The third category contains a list of items which are to be excluded from straight-time compensation but which are not to be credited to overtime compensation. There are several defects in this portion of the definition. In subparagraph (2) for example, the phrase "and other time not worked" is extremely broad and might permit an employer to disguise a large part of his compensation as payments for time not worked.

Secondly, subparagraph (4) which deals with profit-sharing plans seems too broad in permitting the exclusion of all profit-sharing payments pursuant to plans "by the terms of which the employer is required to distribute to, or irrevocably set aside for the benefit of his employees a predetermined percentage of his profits." Here again, the possibilities of separating out a large portion of total compensation in order to evade section 7 would seem to be obvious.

Finally, item 5 permits the exclusion from the regular rate of pay of all bonuses paid less often than quarterly the amount of which is not measured exclusively by the production or efficiency of the employee. The most serious defect of this clause is the word "exclusively" since it appears that production bonuses need not be included if paid less often than quarterly and if some other factor is introduced in the formula. Although the divisions have used the quarterly rule as an enforcement policy in the past, it is not a sound principle to distinguish between bonuses solely on the basis of frequency of payment.

It seems to me that this clause is not needed and that it may open up a possible loop-hole for the evasion of section 7.

Perhaps the most serious defect in the regular rate of pay definition contained in S. 2386 is the authority granted to parties to collective bargaining agreements to exclude from normal straight-time compensation items which for unorganized workers must be included in straight-time compensation. I object to this provision as a matter of principle. It seems to me that if a satisfactory definition of regular rate of pay is developed, it should apply just as much to unionized as to nonunion establishments.

Nor do I see any justification for the rule that production bonuses must be included in the regular rate of pay in the case of unorganized establishments, but in the case of organized establishments included only if distributed monthly or more frequently. It is quite common for a production type of bonus to be distributed quarterly, and it seems to me that all such bonuses, whether in an organized or in an unorganized plant, are properly a part of the regular rate of pay for overtime purposes.

Senator BALL. Don't you think, Mr. Weiss, it is essential that we should lay down a much more explicit definition of what "regular rate of pay" means for employees not working under a collective bargaining agreement, than for those working under such an agreement? I think the policy is to encourage collective bargaining and "regular rate of pay" is usually included in such an agreement. Where the employees have agreed on certain practices under a collective bargaining agreement I think the more we can keep the Federal Government out the better we will be. This overtime on overtime controversy arises out of the disregard by the courts of the bona fide collective bargaining agreement.

Mr. McCOMB. Of course, on one side of the street you have one fellow unionized and you say to him, A contract which you have is to include these phases of overtime, while the fellow not unionized on the other side may not have it because we may make that rule.

Senator BALL. Don't you think the employee who is unionized and whose wages and working conditions are set by collective bargaining is in a better position to protect his rights?

Mr. MCCOMB. Yes. But I do not think you should create this uneven situation where the Government steps in on one side and says, You have to do this, and on the other side of the street, You do not have to.

You are aware of the fact that you have some weak unions and employers who might put through a bonus arrangement not fair to the employees, but we would have to accept it.

Senator BALL. They are covered by the Minimum Wage Act in that event?

Professor Cox. These are only fringe matters we are dealing with? Mr. WEISS. Production type of bonuses may encompass most of a man's earnings.

Senator BALL. What about those on piecework?

Mr. WEISS. You have group production bonuses. A man's base rate may be not more than 75 cents. Frequently they cannot calculate the production bonus, except on a quarterly bonus. They are based on the cost of the item, the savings made and various complicated factors. Senator BALL. Where do they do that?