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Code of Federal Regulations Pertaining to U.S. Department of Labor |
| Labor |
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| Wage and Hour Division, Department of Labor |
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| Interpretative Bulletin on the General Coverage of the Wage and Hours Provisions of the Fair Labor Standards Act of 1938 |
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| General |
29 CFR 776.19 - Employees of independent employers meeting needs of producers for commerce.
- Section Number: 776.19
- Section Name: Employees of independent employers meeting needs of producers for commerce.
(a) General statement. (1) If an employee of a producer of goods for
commerce would not, while performing particular work, be ``engaged in
the production'' of such goods for purposes of the Act under the
principles heretofore stated, an employee of an independent employer
performing the same work on behalf of the producer would not be so
engaged. Conversely, as shown in the paragraphs following, the fact that
employees doing particular work on behalf of such a producer are
employed by an independent employer rather than by the producer will not
take them outside the coverage of the Act if their work otherwise
qualifies as the ``production'' of ``goods'' for ``commerce.''
(2) Of course, in view of the Act's definition of ``goods'' as
including ``any part or ingredient'' of goods (see Sec. 776.20 (a),
(c)), employees of an independent employer providing other employers
with materials or articles which become parts or ingredients of goods
produced by such other employers for commerce are actually employed by a
producer of goods for commerce and their coverage under the Act must be
considered in the light of this fact. For example, an employee of such
an independent employer who handles or in any manner works on the goods
which become parts or ingredients of such other producer's goods is
engaged in actual production of goods (parts of ingredients) for
commerce, and the question of his coverage is determined by this fact
without reference to whether his work is ``closely related'' and
``directly essential'' to the production by the other employer of the
goods in
which such parts or ingredients are incorporated. So also, if the
employee is not engaged in the actual production of such parts or
ingredients, his coverage will depend on whether as an employee of a
producer of goods for commerce, his work is ``closely related'' and
``directly essential'' to the production of the parts or ingredients,
rather than on the principles applicable in determining the coverage of
employees of an independent employer who does not himself produce the
goods for commerce.94
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94 Bracey v. Luray, 138 F. 2d 8 (C.A. 4); Walling v. Peoples
Packing Co., 132 F. 2d 236 (C.A. 10), certiorari denied 318 U.S. 774;
Mid-Continent Pipe Line Co. v. Hargrave, 129 F. 2d 655 (C.A. 10);
Walling v. W. D. Haden Co., 153 F. 2d 196 (C.A. 5).
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(3) Where the work of an employee would be ``closely related'' and
``directly essential'' to the production of goods for commerce if he
were employed by a producer of the goods, the mere fact that the
employee is employed by an independent employer will not justify a
different answer.95 This does not necessarily mean that such
work in every case will remain ``closely related'' to production when
performed by employees of an independent employer. It will, of course,
be as ``directly essential'' to production in the one case as in the
other. (See Sec. 776.17(c)). But in determining whether an employee's
work is ``closely'' or only remotely related to the production of goods
for commerce by an employer other than his own, the nature and purpose
of the business in which he is employed and in the course of which he
performs the work may sometimes become important.
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95 See Kirschbaum Co. v. Walling, 316 U.S. 517; Roland
Electrical Co. v. Walling, 326 U.S. 657; Farmers Reservoir Co. v.
McComb, 337 U.S. 755; H. Mgrs. St., 1949, p. 14. See also Sen. St., 1949
Cong. Rec., p. 15372.
Such factors may prove decisive in particular situations where the
employee's work, although ``directly essential'' to the production of
goods by someone other than his employer, is not far from the borderline
between those activities which are ``directly essential'' and those
which are not. In such a situation, it may appear that his performance
of the work is so much a part of an essentially local business carried
on by his employer without any intent or purpose of aiding production of
goods for commerce by others that the work, as thus performed, may not
reasonably be considered ``closely related'' to such production.96
In other situations, however, where the degree to which the work is
directly essential to production by the producer is greater the fact
that the independent employer is engaged in a business having local
aspects may not be sufficient to negate a close relationship between his
employees' work and such production.97 And it seems clear
that where the independent employer operates a business which, unlike
that of the ordinary local merchant, is directed to providing producers
with materials or services directly essential to the production of their
goods for commerce, the activities of such a business may be found to be
``closely related'' to such production.98 In such event, all
the employees of the independent employer whose work is part of his
integrated effort to meet such needs of producers are covered as engaged
in work closely related and directly essential to production of goods
for commerce.99
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96 M. Mgrs. St., 1949, pp. 14, 15, 10 E. 40th St. Bldg. Co. v.
Callus, 325 U.S. 578.
97 H. Mgrs. St., 1949, p. 14; Kirschbaum Co. v. Walling,
316 U.S. 517; Warren-Bradshaw Drilling Co. v. Hall, 317 U.S. 88.
98 See H. Mgrs. St., p. 14, and 10 E. 40th St. Bldg. Co.
v. Callus, 325 U.S. 578.
99 Kirschbaum Co. v. Walling, 316 U.S. 517 (Stationary
engineers and firemen, watchmen, elevator operators, electricians,
carpenters, carpenters' helper, engaged in maintaining and servicing
loft building for producers); Roland Electrical Co. v. Walling, 326 U.S.
657 (foremen, trouble shooters, mechanics, helpers, and office employees
of company selling and servicing electric motors, generators, and
equipment for commercial and industrial firms); Meeker Coop. Light &
Power Assn. v. Phillips, 158 F. 2d 698 (C.A. 8) (outside employees and
office employees of light and power company serving producers); Walling
v. New Orleans Private Patrol Service, 57 F. Supp. 143 (E. D. La.)
(guards, watchmen, and office employees of company providing patrol
service for producers); Walling v. Thompson, 65 F. Supp. 686 (S.D. Cal.)
(installation and service men, shopmen, bookkeeper, salesman, dispatcher
of company supplying burglar alarm service to producers).
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(b) Extent of coverage under ``closely related'' and ``directly
essential'' clause illustrated. In paragraphs (b)(1) to (5) of this
section, the principles discussed above are illustrated by reference to
a number of typical situations in which goods or services are provided
to producers of goods for commerce by the employees of independent
employers. These examples are intended not only to answer questions as
to coverage in the particular situations discussed, but to provide added
guideposts for determining whether employees in other situations are
doing work closely related and directly essential to such production.
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In H. Mgrs. St., 1949, p. 14 it is said, ``Employees engaged in such
maintenance, custodial and clerical work will remain subject to the Act,
notwithstanding they are employed by an independent employer performing
such work on behalf of the manufacturer, mining company, or other
producer for commerce. All such employees perform activities that are
closely related and directly essential to the production of goods for
commerce.''
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(1) Many local merchants sell to local customers within the same
State goods which do not become a part or ingredient (as to parts or
ingredients, see Sec. 776.20(c)) of goods produced by any of such
customers. Such a merchant may sell to his customers, including
producers for commerce, such articles, for example, as paper towels, or
record books, or paper clips, or filing cabinets, or automobiles and
trucks, or paint, or hardware, not specially designed for use in the
production of other goods.
Where such a merchant's business is essentially local in nature, selling
its goods to the usual miscellany of local customers without any
particular intent or purpose of aiding production of other goods for
commerce by such customers, the local merchant's employees are not doing
work both ``closely related'' and ``directly essential'' to production,
so as to bring them within the reach of the Act, merely ``because some
of the customers * * * are producing goods for interstate [or foreign]
commerce.''1 Therefore, if they do not otherwise engage ``in
commerce'' (see Secs. 776.8 to 776.13) or in the ``production'' of goods
for commerce, they are not covered by the Act.
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1 H. Mgrs. St., 1949, pp. 14, 15.
In such a situation, moreover, even where the work done by the employees
is ``directly essential'' to such production by their employer's
customers, it may not meet the ``closely related'' test. But the more
directly essential to the production of goods for commerce such work is,
the more likely it is that a close and immediate tie between it and such
production exists which will be sufficient, notwithstanding the local
aspect of the employer's business, to bring the employees within the
coverage of the Act on the ground that their work is ``closely related''
as well as ``directly essential'' to production by the employer's
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customers.
Such a close and immediate tie with production exists, for example,
where the independent employer, through his employees, supplies
producers of goods for commerce with things as directly essential to
production as electric motors or machinery or machinery parts for use in
producing the goods of a manufacturer, for mining operations, or for
production of oil, or for other production operations or the power,
water, or fuel required in such production operations, to mention a few
typical examples.2 The fact that these needs of producers are
supplied through the agency of businesses having certain local aspects
cannot alter the obvious fact that the employees of such businesses who
supply these needs are doing work both ``closely related'' and
``directly essential'' to production by the employer's customers. As the
United States Supreme Court has stated: ``Such sales and services must
be immediately available to * * * [the
customers] or their production will stop.'' 3
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2 See H. Mgrs. St., 1949, p. 14; Sen. St., 95 Cong. Rec.,
October 19, 1949, at 15372; Statement of the Chairman of the Committee
on Education and Labor explaining the conference agreement to the House
of Representatives, 1949 Cong. Rec., p. 15135; Roland Electrical Co. v.
Walling, 326 U.S. 657; Reynolds v. Salt River Valley Water Users Assn.,
143 F. 2d 863 (C.A. 9); Meeker Coop. Light & Power Assn. v. Phillips,
158 F. 2d 698 (C.A. 8); Walling v. Hammer, 64 F. Supp. 690 (W.D. Va.);
Holland v. Amoskeag Machine Co., 44 F. Supp. 884 (D. N.H.); Princeton
Mining Co. v. Veach, 63 N.E. 2d 306 (Ind. App.).
3 Roland Electrical Co. v. Walling, 326 U.S. 657, 664.
It should be noted that employees of independent employers providing
such essential goods and services to producers will not be removed from
coverage because an unsegregated portion of their work is performed for
customers other than producers of goods for commerce. For example,
employees of public utilities, furnishing gas, electricity or water to
firms within the State engaged in manufacturing, mining, or otherwise
producing goods for commerce, are subject to the Act notwithstanding
such gas, electricity or water is also furnished to consumers who do not
produce goods for commerce.4
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4 Meeker Coop. Light & Power Assn. v. Phillips, 158 F. 2d 698
(C.A. 8); H. Mgrs. St., 1949, p. 14. For another illustration see H.
Mgrs. St., 1949, p. 26, with reference to industrial laundries.
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(2) On similar principles, employees of independent employers
providing to manufacturers, mining companies, or other producers such
goods used in their production of goods for commerce as tools and dies,
patterns, designs, or blueprints are engaged in work ``closely related''
as well as ``directly essential'' to the production of the goods for
commerce; 5 the same is true of employees of an independent
employer engaged in such work as producing and supplying to a steel
mill, sand meeting the mill's specifications for cast shed, core, and
molding sands used in the production by the mill of steel for
commerce.6 Another illustration of such covered work,
according to managers of the bill in Congress, is that of employees of
industrial laundry and linen supply companies serving the needs of
customers engaged in manufacturing or mining goods for commerce.7
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5 H. Mgrs. St., 1949, p. 14; Sen. St., 1949 Cong. Rec., p.
15372.
6 Walling v. Amidon, 153 F. 2d 159 (C.A. 10); Sen. St.,
95 Cong. Rec., October 19, 1949, at 15372.
7 H. Mgrs. St., 1949, p. 26; Sen. St., 95 Cong. Rec.,
October 19, 1949, at 15372. See also Koerner v. Associated Linen Laundry
Suppliers, 270 App. Div. 986, 62 N.Y.S. 2d 774.
On the other hand, the legislative history makes it clear that employees
of a ``local architectural firm'' are not brought within the coverage of
the Act by reason of the fact that their activities ``include the
preparation of plans for the alteration of buildings within the State
which are used to produce goods for interstate commerce.'' Such
activities are not ``directly essential'' enough to the production of
goods in the buildings to establish the required close relationship
between their performance and such production when they are performed by
employees of such a ``local'' firm.8 Of course, this result
is even more apparent where the activities of the employees of such a
``local'' business may not be viewed as ``directly essential'' to
production. It is clear, for example, that Congress did not believe
``employees of an independently owned and operated restaurant'' should
be brought under the coverage of the Act because the restaurant is
``located in a factory.'' To establish coverage on ``production''
grounds, an employee must be ``shown to have a closer and more direct
relationship to the producing * * * activity'' than this.9
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8 H. Mgrs. St., 1949, p. 15. See also McComb v. Turpin, 81 F.
Supp. 86, 1948 (D. Md.).
9 H. Mgrs. St., 1949, p. 14. Cf. Bayer v. Courtemanche,
76 F. Supp. 193 (D. Conn.). See also Sec. 776.18(b).
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(3) Some further examples may help to clarify the line to be drawn
in such cases. The work of employees constructing a dike to prevent the
flooding of an oil field producing oil for commerce would clearly be
work not only ``directly essential'' but also ``closely related'' to the
production of the oil. However, employees of a materialman quarrying,
processing, and transporting stone to the construction site for use in
the dike would be doing work too far removed from production of the oil
to be considered ``closely related'' thereto.10 Similarly,
the sale of sawmill equipment to a producer of mine props which are in
turn sold to mines within the same State producing coal for commerce is
too remote from production of the coal to be considered
``closely related'' thereto, but production of the mine props, like the
manufacture of tools, dies, or machinery for use in producing goods for
commerce, has such a close and immediate tie with production of the
goods for commerce that it meets the ``closely related'' (as well as the
``directly essential'') test.11
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10 See E. C. Schroeder Co. v. Clifton, 153 F. 2d 385 (C.A. 10)
(opinion of Judge Phillips) and H. Mgrs. St., 1949, p. 15.
11 See Wailing v. Hamner, 64 F. Supp. 690 (W.D. Va.), and
statement of the Chairman of the Committee on Education and Labor
explaining the conference agreement to the House of Representatives,
1949 Cong. Rec., p. 15135.
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(4) A further illustration of the distinction between work that is,
and work that is not, ``closely related'' to the production of goods for
commerce may be found in situations involving activities which are
directly essential to the production by farmers of farm products which
are shipped in commerce. Employees of an employer furnishing to such
farmers, within the same State, water for the irrigation of their crops,
power for use in their agricultural production for commerce, or seed
from which the crops grow, are engaged in work ``closely related'' as
well as ``directly essential'' to the production of goods for
commerce.12 On the other hand, it is apparent from the
legislative history that Congress did not regard, as ``closely related''
to the production of farm products for commerce, the activities of
employees in a local fertilizer plant producing fertilizer for use by
farmers within the same State to improve the productivity of the land
used in growing such products.13 Fertilizer is ordinarily
thought to be assimilated by the soil rather than by the crop and, in
the ordinary case, may be considered less directly essential to
production of farm products than the water or seed, without which such
production would not be possible. Probably the withdrawal from coverage
of such employees (who were held ``necessary'' to production of goods
for commerce under the Act prior to the 1949 amendments 14)
rests wholly or in part on the principles stated in paragraph (a)(3) of
this section and paragraph (b)(1) of this section. Heretofore the
Department has taken the position that producing or supplying feed for
poultry and livestock to be used by farmers within the State in the
production of poultry or cattle for commerce was covered. The case of
Mitchell v. Garrard Mills 15 has reached a contrary
conclusion as to a local producer of such feed in a situation where all
of the feed was sold to farmers and dealers for use exclusively within
the State. For the time being, and until further clarification from the
courts, the Divisions will not assert the position that coverage exists
under the factual situation which existed in this case.
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12 See Farmers Reservoir Co. v. McComb, 337 U.S. 755;
Reynolds v. Salt River Valley Water Users Assn., 143 F. 2d 863 (C.A. 9);
Meeker Coop. Light & Power Assn. v. Phillips, 158 F. 2d 698 (C.A. 8).
Reference should be made to section 13 (a) (6) of the Act providing
an exemption from the wage and hours provisions for employees employed
in agriculture and for certain employees of nonprofit and sharecrop
irrigation companies.
13 H. Mgrs. St. 1949, p. 15.
14 McComb v. Super-A Fertilizer Works, 165 F. 2d 824
(C.A. 1).
15 241 F. 2d 249 (C.A. 6).
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(5) Managers of the legislation in Congress stated that all
maintenance, custodial, and clerical employees of manufacturers, mining
companies, and other producers of goods for commerce perform activities
that are both ``closely related'' and ``directly essential'' to the
production of goods for commerce, and that the same is true of employees
of an independent employer performing such maintenance, custodial, and
clerical work ``on behalf of'' such producers.
Typical of the employees in this covered group are those repairing or
maintaining the machinery or buildings used by the producer in his
production of goods for commerce and employees of a watchman or guard or
patrol or burglar alarm service protecting the producer's
premises.16 On the other hand, the House managers of the bill
made it clear that employees engaged in cleaning windows or cutting
grass at the plant of a producer of goods for
commerce were not intended to be included as employees doing work
``closely related'' to production on ``on behalf of'' the producer where
they were employed by a ``local window-cleaning company'' or a ``local
independent nursery concern,'' merely because the customers of the
employer happen to include producers of goods for commerce.17
A similar view was expressed with respect to employees of a ``local
exterminator service firm'' working wholly within the State
exterminating pests in private homes, in a variety of local
establishments, ``and also in buildings within the State used to produce
goods for interstate commerce.'' 17
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16 See H. Mgrs. St., 1949, p. 14; Sen. St. 1949 Cong. Rec. p.
15372; Kirschbaum Co. v. Walling, 316 U.S. 517; Roland Electrical Co. v.
Walling, 326 U.S. 657; Walling v. Sondock, 132 F. 2d 77 (C.A. 5);
Holland v. Amoskeag Machine Co., 44 F. Supp. 884 (D.N.H.).
17 H. Mgrs. St., 1949, page 15.
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[15 FR 2925, May 17, 1950, as amended at 22 FR 9692, Dec. 4, 1957]
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