(a) General principles. As has been made clear previously, where
``goods'' (as defined in the Act) are produced ``for commerce,'' every
employee engaged in the ``production'' (as explained in Secs. 776.15
through 776.19) of such goods (including any part or ingredient thereof)
is within the general coverage of the wage and hours provisions of the
Act. Goods are produced for ``commerce'' if they are produced for
``trade, commerce, transporation, transmission, or communication among
the several States or between any State and any place outside thereof.''
47 Goods are produced ``for'' such commerce where the
employer intends, hopes, expects, or has reason to believe that the
goods or any unsegregated part of them will move (in the same or in an
altered form or as a part or ingredient of other goods) in such
interstate or foreign commerce.48 If such movement of the
goods in commerce can be reasonably anticipated by the employer when his
employees perform work defined in the Act as ``production'' of such
goods, it makes no difference whether he himself, or a subsequent owner
or possessor of the goods, put the goods in interstate or foreign
commerce.49 The fact that goods do move in interstate or
foreign commerce is strong evidence that the employer intended, hoped,
expected, or had reason to believe that they would so move.
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47 Fair Labor Standards Act, section 3(b).
48 United States v. Darby, 312 U.S. 100; Warren-Bradshaw
Drilling Co. v. Hall, 371 U.S. 88; Schulte Co. v. Gangi, 328 U.S. 108.
49 Schulte Co. v. Gangi, 328 U.S. 108; Warren-Bradshaw
Drilling Co. v. Hall, 417 U.S. 88. See paragraph (d) of this section.
Although it is generally well understood that goods are produced ``for''
commerce if they are produced for movement in commerce to points outside
the State, questions have been raised as to whether work done on goods
may constitute production ``for'' commerce even though the goods do not
ultimately leave the State. As is explained more fully in the paragraphs
following, there are certain situations in which this may be true,
either under the principles above stated (see paragraph (c) of this
section), or because it appears that the goods are produced ``for''
commerce in the sense that they are produced for use directly in the
furtherance, within the particular State, of the actual movement to,
from, or across such State or interstate or foreign commerce. (See
paragraph (b) of this section).
(b) Goods produced for direct furtherance of interstate movement.
(1) The Act's definition of ``commerce,'' as has been seen, describes a
movement, among the several States or between any State and any outside
place, of trade, commerce, transportation, transmission, or
communication.'' Whenever goods are produced ``for'' such movement, such
goods are produced ``for commerce,'' whether or not there is any
expectation or reason to anticipate that the particular goods will leave
the State.50
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50 Fleming v. Atlantic Co., 40 F. Supp. 654, affirmed in 131
F. 2d 518 (C.A. 5).
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(2) The courts have held that particular goods are produced ``for''
commerce when they are produced with a view to their use, whether within
or without the State, in the direct furtherance of the movement of
interstate or foreign commerce. Thus, it is well settled that ice is
produced ``for'' commerce when it is produced for use by interstate rail
or motor carriers in the refrigeration or cooling of the equipment in
which the interstate traffic actually moves, even though the particular
ice may melt before the equipment in which it is placed leaves the
State.51 The goods (ice) produced for such use ``enter into
the very means of transportation by which the burdens of traffic are
borne.'' 52 The same may be said of electrical energy
produced and sold within a single State for such uses as lighting and
operating signals on railroads and at airports to guide interstate
traffic, lighting and operating radio stations transmitting programs
interstate, and lighting and message transmission of telephone and
telegraph companies.53 Similar principles would apply to the
production of fuel or water for use in the operation of railroads with
which interstate and foreign commerce is carried on; the production of
radio or television scripts which provide the basis for programs
transmitted interstate; the production of telephone and telegraph poles
for use in the necessary repair, maintenance, or improvement of
interstate communication systems; the production of crushed rock, ready-
mixed concrete, cross-ties, concrete culvert pipe, bridge timbers, and
similar items for use in the necessary repair, maintenance, or
improvement of railroad roadbeds and bridges which serve as the
instrumentalities over which interstate traffic moves.
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51 Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4),
certiorari denied 317 U.S. 634; Atlantic Co. v. Walling, 131 F. 2d 518
(C.A. 5); Chapman v. Home Ice Co.; 136 F. 2d 353 (C.A. 6) certiorari
denied 320 U.S. 761; Southern United Ice Co. v. Hendrix, 153 F. 2d 689
(C.A. 6); Hansen v. Salinas Valley Ice Co., 62 Cal. App. 357, 144 F. 2d
896.
52 Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4).
53 Lewis v. Florida Power & Light Co., 154 F. 2d 751
(C.A. 5); see also Walling v. Connecticut Co., 154 F. 2d 552 (C.A. 2).
Similarly, in the case of highways, pipe lines, and waterways which
serve as instrumentalities of interstate and foreign commerce, the
production of goods for use in the direct furtherance of the movement of
commerce thereon would be the production of goods ``for
commerce.'' The production of materials 54 for use in the
necessary maintenance, repair, or improvement of the instrumentality so
that the flow of commerce will not be impeded or impaired is an example
of this. Thus, stone or ready-mixed concrete, crushed rock, sand,
gravel, and similar materials for bridges or dams; like materials or
bituminous aggregate or oil for road surfacing; concrete or galvanized
pipe for road drainage; bridge planks and timbers; paving blocks; and
other such materials may be produced ``for'' commerce even though they
do not leave the State.
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54 Walling v. Staffen, 5 W.H. Cases 1002 (W.D. N.Y.), 11
Labor Cases (CCH) par. 63, 102; McCombs v. Carter, 8 W.H. Cases 498
(E.D. Va.), 16 Labor Cases (CCH) par. 64, 964. Contra, McComb v.
Trimmer, 85 F. Supp. 565 (D. N.J.). Cf. Engebretson v. Albrecht, 150 F.
2d 602 (C.A. 7).
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(3) This does not, however, necessarily mean that the production of
such materials within a State is always production ``for'' commerce when
the materials are used in the same State for the maintenance, repair, or
improvement of highways or other instrumentalities carrying interstate
traffic. In determining whether the production is actually ``for''
commerce in a situation where there is no reason to believe that the
goods will leave the State, a practical judgment is required. Some
illustrations may be helpful.
On the one hand, there are situations where there is little room for
doubt that the goods are produced ``for'' commerce in the sense that the
goods are intended for the direct furtherance of the movement of
commerce over the instrumentalities of transportation and communication.
The most obvious illustration is that of special-purpose goods such as
cross-ties for railroads, telephone or telegraph poles, or concrete pipe
designed for highway use. Another illustration is sand and gravel for
highway repair or reconstruction which is produced from a borrow pit
opened expressly for that purpose, or from the pits of an employer whose
business operations are conducted wholly or in the substantial part with
the intent or purpose of filling highway contracts. (The fact that a
substantial portion of the employer's gross income is derived from
supplying such materials for highway repair and reconstruction would be
one indication that a substantial part of his business is directed to
the purpose of meeting such needs of commerce.)
On the other hand, there are situations where materials or other goods
used in maintaining, repairing, or reconstructing instrumentalities of
commerce are produced and supplied by local materialmen under
circumstances which may require the conclusion that the goods are not
produced ``for'' commerce. Thus, a materialman may be engaged in an
essentially local business serving the usual miscellany of local
customers, without any substantial part of such business being directed
to meeting the needs of highway repair or reconstruction. If, on
occasion, he happens to produce or supply some materials which are used
within the State to meet such highway needs, and he does so as a mere
incident of his essentially local business, the Administrator will not
consider that his employees handling or working on such materials are
producing goods ``for'' commerce. This is, rather, a typically local
activity of the kind the Act was not intended to cover. The same may be
said of the production of ice by an essentially local ice plant where
the only basis of coverage is the delivery of ice for the water cooler
in the community railroad station. The employees producing ice in the
ice plant for local use would not by reason of this be covered as
engaged in the production of goods ``for'' commerce.
Other illustrations might be given but these should emphasize the
essential distinction which must be kept in mind. Borderline cases will,
of course, arise. In each such case the the facts must be examined and a
determination made as to whether or not the goods may fairly be viewed
as produced ``for'' use in the direct furtherance of the movement of
interstate or foreign commerce, and thus ``for'' commerce.
(c) Controlling effect of facts at time ``production'' occurs. (1)
Whether employees are engaged in the production of goods ``for''
commerce depends upon circumstances as they exist at the time the goods
are being produced, not upon
some subsequent event. Thus, if a lumber manufacturer produces lumber to
fill an out-of-State order, the employees working on the lumber are
engaged in the production of goods for commerce and within the coverage
of the Act's wage and hours provisions, even though the lumber does not
ultimately leave the State because it is destroyed by fire before it can
be shipped. Similarly, employees drilling for oil which the employer
expects to leave the State either as crude oil or refined products are
engaged in the production of goods for commerce while the drilling
operations are going on and are entitled to be paid on that basis
notwithstanding some of the wells drilled may eventually prove to be dry
holes.55
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55 Culver v. Bell & Loffland, 146 F. 2d 29 (C.A. 9); see also
Warren-Bradshaw Drilling Co. v. Hall, 317 U.S. 88.
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(2) On the other hand, if the lumber manufacturer first mentioned
produces lumber to fill the order of a local contractor in the
expectation that it will be used to build a schoolhouse within the
State, the employees producing the lumber are not engaged in the
production of goods ``for'' commerce and are not covered by the Act.
This would remain true notwithstanding the contractor subsequently goes
bankrupt and the lumber is sold to a purchaser who moves it to another
State; the status of the employees for purposes of coverage cannot in
this situation, any more than in the others, be retroactively changed by
the subsequent event.
(d) Goods disposed of locally to persons who place them in commerce.
It is important to remember that if, at the time when employees engage
in activities which constitute ``production of goods'' within the
meaning of the Act, their employer intends, hopes, expects, or has
reason to believe that such goods will be taken or sent out of the State
by a subsequent purchaser or other person into whose possession the
goods will come, this is sufficient to establish that such employees are
engaged in the production of such goods ``for'' commerce and covered by
the Act. Whether the producer passes title to the goods to another
within the State is immaterial.56 The goods are produced
``for'' commerce in such a situation whether they are purchased f.o.b.
the factory and are taken out of the State by the purchaser, or whether
they are sold within the State to a wholesaler or retailer or
manufacturer or processor who in turn sells them, either in the same
form or after further processing, in interstate or foreign commerce. The
same is true where the goods worked on by the producer's employees are
not owned by the producer and are returned, after the work is done, to
the possession of the owner who takes or sends them out of the
State.57 Similarly, employees are engaged in the production
of goods ``for'' commerce when they are manufacturing, handling, working
on, or otherwise engaging in the production of boxes, barrels, bagging,
crates, bottles, or other containers, wrapping or packing material which
their employer has reason to believe will be used to hold the goods of
other producers which will be sent out of the State in such containers
or wrappings. It makes no difference that such other producers are
located in the same State and that the containers are sold and delivered
to them there.58
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56 Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4).
certiorari denied 317 U.S. 634; Bracey v. Luray, 138 F. 2d 8 (C.A. 4).
57 Schulte Co. v. Gangi, 328 U.S. 108; Warren-Bradshaw
Drilling Co. v. Hall, 317 U.S. 88; Walling v. Kerr, 47 F. Supp. 852
(E.D. Pa.).
58 Enterprise Box Co. v. Fleming, 125 F. 2d 897 (C.A. 5),
certiorari denied 316 U.S. 704; Dize v. Maddrix, 144 F. 2d 584 (C.A. 4),
affirmed 324 U.S. 697; Walling v. Burch, 5 W. H. Cases 323 (S.D. Ga.); 9
Labor Cases (CCH) par. 62, 613; Fleming v. Schiff, 1 W.H. Cases 893 (D.
Colo.), 5 Labor Cases (CCH) par. 60, 864.
It should be noted that where empty containers are purchased,
loaded, or transported within a single State as a part of their
movement, as empty containers, out of the State, an employee engaged in
such purchasing, loading, or transporting operations is covered by the
Act as engaged ``in commerce.'' Atlantic Co. v. Weaver, 150 F. 2d 843
(C.A. 4); Klotz v. Ippolito, 40 F. Supp. 422 (S.D. Tex.); Orange Crush
Bottling Co. v. Tuggle, 70 Ga. App. 144, 27 S.E. 2d 769.
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