149

part. Under the terms of the quoted provision, time spent by employees prior to the enactment of the latter act in activities which were not compensable by contract, custom, or practice within the meaning of the Portal Act is to be excluded in computing worktime for purposes of determining whether the minimum wage and overtime requirements of the Fair Labor Standards Act were met.150 On the other hand, time that constituted hours worked, which was devoted to activities which were so compensable, is not removed by these provisions from the category of time worked, for purposes of the Fair Labor Standards Act; the statute expressly provides that all such time shall be counted in computing hours worked.15

(b) In determining time worked prior to May 14, 1947, in accordance with the provision quoted in paragraph (a) of this section, regard must be had to the "portion of the day" provisions of section 2 (b) of the Portal-to-Portal Act as well as the more general provisions of section 2 (a).162

§ 790.25 Jurisdiction of courts limited as to wage claims for periods prior to May 14, 1947. (a) Section 2 (d) of the Portal Act provides that:

No court of the United State, of any State, Territory, or possession of the United States,

149 See §§ 790.5 to 790.8.

150 This aspect of the quoted provision is, as explained in the Conference Report, intended to make clear, as was done in section 2 of the Senate amendment to the bill (H. R. 2157) as passed by the House of Representatives (not contained in the bill as finally enacted), that no judicial or administrative interpretation will have the effect of including as worktime other time which was not made compensable by contract, custom, or practice. Conference Report, p. 10.

151 The purpose of this portion of the quoted provision, as explained by the Conference Committee, is to emphasize that employers are not relieved from liability for the payment of minimum wages and overtime compensation for any time during which the employee engaged in activities compensable under contract, custom, or practice as provided in the statute. Section 3 of the Senate amendment, which so provided, was omitted under the conference agreement as surplusage, and as fully covered by section 2 (c) of the bill as agreed to in conference. Conference Report, p. 10.

152 These provisions are quoted in § 790.23. See also Conference Report, p. 10, and cf. § 790.12.

or of the District of Columbia, shall have jurisdiction of any action or proceeding, whether instituted prior to or on or after the date of the enactment of this Act, to enforce liability or impose punishment for or on account of the failure of the employer to pay minimum wages or overtime compensation under the Fair Labor Standards Act of 1938, as amended, to the extent

that such action or proceeding seeks to enforce any liability or impose any punishment with respect to an activity which was not compensable under subsections (a) and (b) of this section.153

(b) It will be noted that this provision of the act limits the jurisdiction of both Federal and State courts in all such acts or proceedings whether commenced before or after the enactment of the act. It is important to bear in mind that this provision does not affect the jurisdiction of any court in any action or proceeding insofar as it is based on failure to pay minimum wages or overtime compensation for any activities engaged in by employees on or after May 14, 1947. This limitation or jurisdiction affects only those actions or proceedings in which it is sought to enforce liability or impose punishment on an employer for or on account of his failure to pay the required minimium wages or overtime compensation for activities engaged in by employees during periods prior to May 14, 1947, and then only to the extent that such activities were not compensable by contract, custom, or practice as provided in subsections 2 (a), and 2 (b) of the Portal Act." The denial of jurisdiction is "not applicable to actions of proceedings in which judgment has become final prior to the date of the enactment" of the act."

155

154

(c) It appears from the language quoted above that the jurisdiction of the courts with respect to an action or proceeding remains unaffected by this provision to the extent that such an action or proceeding seeks to impose liability or punishment either (1) for failure to pay wages in accordance with the Fair Labor Standards Act for or on account of activities which were compensable by contract, custom, or practice as provided in sections 2 (a), (b) of the Portal Act, or (2) for child labor or other violations of the Fair Labor Standards Act where no

153 The text of subsections (a) and (b) appears above in § 790.23 (a).

154 See in this connection §§ 790.23 and 790.24.

155 Conference Report, p. 11.

liability or punishment is sought to be imposed "for or on account of the failure of the employer to pay minimum wages or overtime compensation."

§ 790.26 Prohibition of assignments. Assignees of employees' causes of action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages under the Fair Labor Standards Act have, in the past, been allowed to recover in some cases where such assignments are permitted by local law, on the theory that the Act does not expressly or by implication forbid such assignments and that they do not contravene public policy.15 Certain such assignments are now prohibited by section 2 (e) of the Portal Act. 157

159

This section expressly refers only to causes of action which accrued 158 prior to May 14, 1947 and applies only "to the extent that" such a cause of action "is based on an activity which was not compensable" under contract, custom, or practice within the meaning of the provisions of section 2 (a) and 2 (b) of this act.15 To the extent that such a cause of action is based on such an activity, section 2 (e) provides that neither it nor "any interest in" it "shall hereafter be assignable, in whole or in part." As explained in the Conference Report this provision will render it impossible for anyone (even though permitted to do so under State law) to buy up existing claims which were not compensable under contract, custom or practice, with the hope of compromising such claims at a profit under the provisions of section 3 of the act." 161

100

$790.27 Compromise of claims existing prior to May 14, 1947. (a) Section 3 of the Portal Act authorizes compromises of certain claims on causes of action under the Fair Labor Standards Act which accrued before enactment of the Portal Act, as follows:

(a) Any cause of action under the Fair Labor Standards Act of 1938, as amended, which accrued prior to the date of the enactment of this act, or any action

188 Steiner V. Pleasantville Constructors,

Inc., 9 Labor Cas. (C. C. H.) par 66,902. Cf. Titus v. Wallick, 306 U. S. 282.

157 Cf section 5 of the act, discussed in § 790.20.

158 As to meaning of "accrued," see the discussion in § 790.21 (b).

159 These provisions are discussed in § 790.23. 160 Conference Report, p. 11.

101 See the discussion of section 3 in § 790.27.

(whether instituted prior to on or after the date of the enactment of this act) to enforce such a cause of action, may hereafter be compromised in whole or in part, if there exists a bona fide dispute as to the amount payable by the employer to his employee; except that no such action or cause of action may be so compromised to the extent that such compromise is based on an hourly wage rate less than the minimum required under such act, or on a payment for overtime at a rate less than one and one-half times such minimum hourly wage rate.

(c) Any such compromise

in

the absence of fraud or duress, shall, according to the terms thereof, be a complete satisfaction of such cause of action and a complete bar to any action based on such cause of action.

(d) The provisions of this section shall also be applicable to any compromise heretofore so made or given.

(e) As used in this section, the term "compromise" includes "adjustment," "settlement," and "release."

The foregoing provisions authorize compromise only of those causes of action accruing prior to May 14, 1947, and of actions thereon; the statute does not change existing law as to compromise of such claims," 102 with respect to any cause of action accruing after the date of enactment of the act.14 Subject to the conditions discussed in paragraph (b) of this section, this statutory authorization of compromises extends to the following:

163

(1) All or any part of any cause of action accruing prior to May 14, 1947.

(2) All or any part of any action to enforce cause of action included in subparagraph (1) of this paragraph, whether such action was instituted before, on, or after May 14, 1947.

(3) Any compromise made prior to May 14, 1947, which comes within the

162 Prior to the Portal Act, it was settled that claims of employees for minimum and overtime wages under the Fair Labor Standards Act could not be compromised because of disputes as to coverage of the act. Schulte Co. v. Gangi, 328 U. S. 108.

163 For the meaning of "accruing" see § 790.21 (b). The legislative history indicates that the omission of a provision for compromises or settlement of claims arising after enactment of the statute constitutes a recognition by the Congress of the danger, emphasized by the Supreme Court, that such a provision would lead to a breakdown of the labor standards established in the Fair Labor Standards Act. See Senator Donnell's statement, 1947 Cong. Rec. 2192.

164 Conference Report P. 12.

terms of section 3 of the Portal-to-Portal Act.

(b) The compromise of existing claims just described is permitted, if, and only if all of the following conditions are fulfilled in each case:

(1) Existence of a bona fide dispute as to the amount payable by an employer to employee.

(2) Absence of fraud and duress.

(3) The compromise sum for straighttime hours worked must be based on an hourly wage rate not less than the minimum rate per hour prescribed by the Fair Labor Standards Act or by a wage order issued thereunder, which is at present 40 cents (except in certain industries in Puerto Rico and the Virgin Islands).

(4) The compromise sum for overtime hours worked must be based on a rate not less than one and one-half times the minimum hourly wage rate prescribed by the Fair Labor Standards Act or by a wage order issued thereunder, which at the present means at least 11⁄2 x 40, or 60 cents for each overtime hour (except in certain industries in Puerto Rico and the Virgin Islands).

(c) As pointed out in paragraph (b) (4) of this section, the sums paid in compromise of overtime claims may be based, as a minimum, on one and one-half times the 40-cent minimum hourly wage. Thus, an employee whose regular hourly rate is 50 cents and who, accordingly, has a right to overtime at 75 cents per hour may compromise an existing claim, as authorized by section 3, for 60 cents an overtime hour, but not for less.15 Permitting compromises of certain existing claims as specified does not, of course, alter the general requirement of section 7 of the Fair Labor Standards Act that overtime compensation under the Act must be paid at a rate not less than one and one-half times the regular rate at which the employee is actually employed.

(d) A "bona fide dispute" which must exist before any compromise can be made, would seem to mean an honest disagreement between employer and employee. It follows that no compromise would be permitted where there is no

165 See Conference Report, p. 11; statement of Senator Wiley, explaining the conference agreement to the Senate, 1947 Cong. Rec. 4397; statement of Representative Gwynne, 1947 Cong. Rec. 4513.

actual dispute as to the facts or the applicable law, or where the exact amount of an employer's liability under the law is clear. The Portal Act does not permit an employee to merely release his undisputed right to straight-time or overtime wage payments.10

§ 790.28 Waiver of right to liquidated damages. (a) The general rule that an employee whose employer has failed to pay him the minimum or overtime wages required by the Fair Labor Standards Act is not permitted to waive his right under section 16 (b) of the act to liquidated damages for withholding the compensation due,107 is modified by section 3 (b), (c), (d), of the Portal Act. Under these provisions, an employee may waive, in whole or in part, his right to liquidated damages with respect to activities performed before May 14, 1947. This permission is extended retrospectively to waivers of liquidated damages made by employees prior to May 14, 1947. Such waivers are made valid unless their invalidity was determined prior to that date by a final court judgment. It is provided that, in the absence of fraud or duress and according to the terms of the waiver, any waiver authorized by section 3 shall be a complete satisfaction of the employee's cause of action for the liquidated damages so waived and a complete bar to any action based on such cause of action.

(b) The general rule stated in paragraph (a) of this section remains in effect in all situations where the liquidated damages are based on underpayments for activities performed on or after May 14, 1947. The Portal Act does not authorize the waiver by an employee of his right to such liquidated damages.**

(c) It should be noted that an employee is not permitted to waive his right to the statutory minimum wages or to

168 Representative Walter, explaining the conference agreement to the House of Representatives, 1947 Cong. Rec. 4515, indicated that the phrase, "dispute as to the amount payable," would include disagreements as to matters of law such as whether employee's work is covered by the Fair Labor Standards Act or whether the employer is exempt, as well as disagreements as to matters of fact such as the number of hours worked or the wage rates paid.

107 See O'Neil v. Brooklyn Savings Bank, 324 U. S. 697.

168 See conference Report, p. 12. As to discretion of courts in awarding liquidated damages in such a case, see § 790.22.

169

overtime payments at one and one-half times his regular hourly rate." For example, an employee covered by the Fair Labor Standards Act who had been paid only 30 cents per hour for work performed in 1947 to May 14, and who did not work more than 40 hours in any workweek, has a valid claim for 10 cents for each hour worked plus liquidated damages in an equal amount.170 He is permitted to waive only his right to liquidated damages. Similarly, an employee who worked 48 hours a week prior to May 14, 1947 and was paid only 80 cents an hour has a valid claim for an additional 40 cents for each hour worked after 40 in the workweek, which he is not permitted to waive, although he may waive all or part of the equal amount to which he may be entitled as liquidated damages,

(d) No waiver by an employee of his right to recover attorney's fees and court costs in an action under section 16 (b) of the Fair Labor Standards Act is authorized by section 3.

§ 790.29 "Area of production" exemption prior to December 26, 1946. (a) As explained in the conference report on the bill, section 12 of the Portal Act relieves employers from liability and punishment for failure to pay employees minimum wages or overtime compensation as prescribed in the Fair Labor Standards Act for or on account of any activity (within the scope of one of the "area of production" exemptions) engaged in by their employees prior to December 26, 1946, if such employer can show that he:

172

171

(1) was relieved from such liability or punishment by reason of a valid definition of "area of production" by the Administrator applicable at the time of the performance of the activity, or (2) would have been so relieved by reason of an invalid definition applicable at the time of the performance

109 As to compromise of such claims arising out of activities performed before May 14, 1947, see § 790.27.

170 The recovery of this amount as liquidated damages is made subject to the sound discretion of the courts under certain conditions. See the discussion of section 11 of the Portal Act in § 790.22.

171 These exemptions are contained in sections 7 (c) and 13 (a) (10) of the Fair Labor Standards Act.

172 See Addison v. Holly Hill Fruit Products, Inc., 322 U. S. 607.

if such definition had been valid, or (3) would have been so relieved if the definition finally made by the Administrator on December 18, 1946, and published in the FEDERAL REGISTER on December 25, 1946, had been in force on and after the effective date of the sections of such Act of 1938 providing for minimum wages and overtime compensation.173

The conference report points out also that the protection to the employer under the foregoing provisions for acts or omissions up to December 26, 1946, will exist even though hereafter the regulation of December 1946 is held invalid.

(b) It should be noted, however, that the provisions of section 12 do not relieve employers from liability or punishment under the Fair Labor Standards Act for acts or omissions with respect to any of the following activities engaged in by their employees:

(1) Activities engaged in on and after December 26, 1946.17

(2) Activities engaged in during the period from October 24, 1938, through December 25, 1946, by employees who were not employed within the "area of production" as defined in either (i) any regulation of the Administrator (valid or invalid) which was applicable at the time they were performed, or (ii) the currently effective regulation issued December 25, 1946.175

(3) Activities other than those for which section 13 (a) (10) or the relevant portion of section 7 (c) provides an exemption, even though performed by employees employed within the "area of production" as defined in such a regulation."

176

All these latter activities remain subject to the applicable provisions of the Fair Labor Standards Act of 1938, as amended, and to current and subsequent regulations of the Administrator, to the same extent as they would have been had section 12 of the Portal-to-Portal Act not been enacted. Other sections of the Portal-to-Portal Act may, of course, be applicable in appropriate situations.

173 Conference Report, p. 17.

174 As to activities performed on or after December 26, 1946, and prior to March 1, 1947, see § 790.18 (f).

175 Part 536 of this chapter.

176 See the Interpretative Bulletin (No. 14) on exemptions applicable to agriculture and operations on products of agriculture, which will be issued in revised form as Part 780, Subpart A, of this chapter.