A-88428, AUGUST 30, 1937, 17 COMP. GEN. 201

A-88428: Aug 30, 1937

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FOR "INCREASED MANUFACTURING OVERHEAD AND FIELD ERECTION OVERHEAD" CLAIMED TO HAVE BEEN OCCASIONED BY REDUCTION IN WORKING HOURS FROM 50 TO 35 PER WEEK. WHERE THERE WAS NO INCREASE IN THE HOURLY RATES OF PAY. ALLEGED INCREASED COSTS CLAIMED TO HAVE BEEN INCURRED IN CONNECTION WITH THE PERFORMANCE OF YOUR CONTRACT OF MAY 5. ALLEGED INCREASED COSTS CLAIMED TO HAVE BEEN INCURRED BY YOU IN CONNECTION WITH THE PERFORMANCE OF YOUR CONTRACT OF SEPTEMBER 27. BOTH CLAIMS WERE FILED UNDER THE ACT OF JUNE 16. ARE ALLEGED TO HAVE RESULTED FROM COMPLIANCE WITH THE PRESIDENT'S REEMPLOYMENT AGREEMENT AND THE CODE OF FAIR COMPETITION FOR THE MACHINERY AND ALLIED PRODUCTS INDUSTRY. ALL CLAIMED TO HAVE BEEN OCCASIONED BY REDUCTION IN WORK HOURS FROM 50 HOURS TO 35 HOURS A WEEK IN COMPLIANCE WITH THE PRESIDENT'S REEMPLOYMENT AGREEMENT.

A-88428, AUGUST 30, 1937, 17 COMP. GEN. 201

CONTRACTORS - SUBCONTRACTORS - RELIEF - ACT, JUNE 16, 1934 A SUBCONTRACTOR OF GOVERNMENT CONTRACTOR MAY NOT BE REIMBURSED UNDER THE ACT OF JUNE 16, 1934, 48 STAT. 974, AS FOR COMPLIANCE WITH THE PRESIDENT'S REEMPLOYMENT AGREEMENT, FOR "INCREASED MANUFACTURING OVERHEAD AND FIELD ERECTION OVERHEAD" CLAIMED TO HAVE BEEN OCCASIONED BY REDUCTION IN WORKING HOURS FROM 50 TO 35 PER WEEK, WHERE THERE WAS NO INCREASE IN THE HOURLY RATES OF PAY, NOTWITHSTANDING THE WAGES PAID PRIOR TO SUCH SIGNING EXCEEDED THE MINIMUM ESTABLISHED BY THE REEMPLOYMENT AGREEMENT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE STEPHENS-ADAMSON MANUFACTURING CO., AUGUST 30, 1937:

THERE HAS BEEN REFERRED TO THIS OFFICE, BY THE HONORABLE JAMES HAMILTON LEWIS, YOUR LETTER OF JULY 17, 1937, REQUESTING REVIEW OF THE TWO SETTLEMENTS OF APRIL 24, 1937, DISALLOWING, RESPECTIVELY, YOUR CLAIM FOR $5,016.82, ALLEGED INCREASED COSTS CLAIMED TO HAVE BEEN INCURRED IN CONNECTION WITH THE PERFORMANCE OF YOUR CONTRACT OF MAY 5, 1932, WITH THE B-W CONSTRUCTION CO., GENERAL CONTRACTOR, FOR THE EXTENSION AND REMODELING OF THE WASHINGTON, D.C., POST OFFICE, UNDER CONTRACT NO. T1SA-3124, AND YOUR CLAIM FOR $425.23, ALLEGED INCREASED COSTS CLAIMED TO HAVE BEEN INCURRED BY YOU IN CONNECTION WITH THE PERFORMANCE OF YOUR CONTRACT OF SEPTEMBER 27, 1932, WITH N. P. SEVERIN CO., GENERAL CONTRACTOR, FOR THE CONSTRUCTION OF THE NEWARK, N.J., POST OFFICE, UNDER CONTRACT NO. T1SA- 3284. THE WORK UNDER YOUR SAID CONTRACTS INVOLVED THE INSTALLATION OF MAIL-HANDLING EQUIPMENT AND YOUR CONTRACT WITH THE B-W CONSTRUCTION CO. INVOLVED ALSO CHANGING AND RECONDITIONING EXISTING EQUIPMENT. BOTH CLAIMS WERE FILED UNDER THE ACT OF JUNE 16, 1934, 48 STAT. 974, AND ARE ALLEGED TO HAVE RESULTED FROM COMPLIANCE WITH THE PRESIDENT'S REEMPLOYMENT AGREEMENT AND THE CODE OF FAIR COMPETITION FOR THE MACHINERY AND ALLIED PRODUCTS INDUSTRY.

THE CLAIMS STATE INCREASED MANUFACTURING OVERHEAD AND FIELD ERECTION OVERHEAD, ALL CLAIMED TO HAVE BEEN OCCASIONED BY REDUCTION IN WORK HOURS FROM 50 HOURS TO 35 HOURS A WEEK IN COMPLIANCE WITH THE PRESIDENT'S REEMPLOYMENT AGREEMENT, WHICH IT APPEARS YOU SIGNED ON AUGUST 10, 1933, AND THE CODE OF FAIR COMPETITION FOR THE MACHINERY AND ALLIED PRODUCTS INDUSTRY, EFFECTIVE MARCH 28, 1934. BOTH CLAIMS WERE DISALLOWED FOR THE REASON IT APPEARED THAT YOU FAILED TO INCREASE THE PAY OF YOUR EMPLOYEES, WHO, PRIOR TO THE DATE OF THE PRESIDENT'S REEMPLOYMENT AGREEMENT, HAD BEEN RECEIVING WAGES IN EXCESS OF THE MINIMUM ESTABLISHED BY SAID AGREEMENT.

PARAGRAPH 2 OF THE PRESIDENT'S REEMPLOYMENT AGREEMENT FIXED THE HOURS OF LABOR PER WEEK FOR ACCOUNTING, CLERICAL, BANKING, OFFICE, SERVICE, OR SALES EMPLOYEES AT 40 HOURS, AND PARAGRAPH 3 OF SAID AGREEMENT FIXED THE MAXIMUM HOURS PER WEEK FOR FACTORY OR MECHANICAL WORKERS OR ARTISANS AT 35 HOURS UNTIL DECEMBER 31, 1933, WITH THE RIGHT TO WORK A MAXIMUM WEEK OF 40 HOURS FOR ANY 6 WEEKS WITHIN THIS PERIOD BUT NOT IN EXCESS OF 8 HOURS IN ANY 1 DAY. PARAGRAPH 4 SET OUT THE EXCEPTIONS TO THE MAXIMUM HOURS FIXED IN PARAGRAPHS 2 AND 3. PARAGRAPHS 5 AND 6 SET OUT THE RATES OF MINIMUM PAY FOR THE VARIOUS CLASSES OF WORKERS. PARAGRAPH 7 OF SAID AGREEMENT, THE PROVISIONS OF WHICH YOU APPEAR TO HAVE VIOLATED, READS AS FOLLOWS:

(7) NOT TO REDUCE THE COMPENSATION FOR EMPLOYMENT NOW IN EXCESS OF THE MINIMUM WAGES HEREBY AGREED TO (NOTWITHSTANDING THAT THE HOURS WORKED IN SUCH EMPLOYMENT MAY BE HEREBY REDUCED) AND TO INCREASE THE PAY FOR SUCH EMPLOYMENT BY AN EQUITABLE READJUSTMENT OF ALL PAY SCHEDULES.

THIS PARAGRAPH WAS INTERPRETED IN RELEASE NO. 124 OF THE NATIONAL RECOVERY ADMINISTRATION, DATED JULY 28, 1933, WHICH APPEARS IN NATIONAL RECOVERY ADMINISTRATION BULLETIN NO. 4, IN WHICH IT IS STATED:

PARAGRAPH 7 MEANS, FIRST, THAT COMPENSATION OF EMPLOYEES ABOVE THE MINIMUM WAGE GROUP (WHETHER NOW FIXED BY THE HOUR, DAY, WEEK, OR OTHERWISE) SHALL NOT BE REDUCED, EITHER TO COMPENSATE THE EMPLOYER FOR INCREASES THAT HE MAY BE REQUIRED TO MAKE IN THE MINIMUM WAGE GROUPIN ORDER TO COMPLY WITH THE AGREEMENT, OR TO TURN THIS REEMPLOYMENT AGREEMENT INTO A MERE SHARE-THE-WORK MOVEMENT WITHOUT A RESULTING INCREASE OF TOTAL PURCHASING POWER. THIS FIRST PROVISION OF PARAGRAPH 7 IS A GENERAL STATEMENT OF WHAT SHALL NOT BE DONE.

THE REST OF PARAGRAPH 7 IS A PARTICULAR STATEMENT OF WHAT SHALL BE DONE, WHICH IS THAT RATES OF PAY FOR EMPLOYEES ABOVE THE MINIMUM WAGE GROUP SHALL BE INCREASED BY "EQUITABLE READJUSTMENTS.' NO HARD AND FAST RULE CAN BE LAID DOWN FOR SUCH READJUSTMENTS, BECAUSE THE VARIATIONS IN RATES OF PAY AND HOURS OF WORK WOULD MAKE THE APPLICATION OF ANY FORMULA UNJUST IN THOUSANDS OF CASES. WE PRESENT, HOWEVER, THE FOLLOWING EXAMPLES OF THE NEED FOR AND METHODS OF SUCH READJUSTMENTS:

EXAMPLE 1.--- EMPLOYEES NOW WORKING 40 HOURS PER WEEK IN FACTORIES. WHEN HOURS ARE REDUCED TO 35, THE PRESENT RATE PER HOUR IF INCREASED ONE- SEVENTH WOULD PROVIDE THE SAME COMPENSATION FOR A NORMAL WEEK'S WORK AS BEFORE.

EXAMPLE 2.--- EMPLOYEES NOW WORKING 60 HOURS PER WEEK IN FACTORIES. WHEN HOURS ARE REDUCED TO 35, A RATE PER HOUR IF INCREASED ONE-SEVENTH MIGHT BE INSUFFICIENT TO PROVIDE PROPER COMPENSATION. BUT, TO INCREASE THE RATE BY FIVE-SEVENTHS, IN ORDER TO PROVIDE THE SAME COMPENSATION FOR 35 HOURS AS PREVIOUSLY EARNED IN 60, MIGHT IMPOSE AN INEQUITABLE BURDEN ON THE EMPLOYER. THE 60-HOUR WEEK MIGHT HAVE BEEN IN EFFECT BECAUSE OF A RUSH OF BUSINESS, ALTHOUGH A 40-HOUR WEEK MIGHT HAVE BEEN NORMAL PRACTICE AT THE SAME HOURLY WAGE. SEASONAL OR TEMPORARY INCREASES IN HOURS NOW IN EFFECT, OR RECENT INCREASES IN WAGES, ARE PROPER FACTORS TO BE TAKEN INTO CONSIDERATION IN MAKING EQUITABLE READJUSTMENTS.

THE POLICY GOVERNING THE READJUSTMENT OF WAGES OF ALL EMPLOYEES IN WHAT MAY BE TERMED THE HIGHER WAGE GROUPS REQUIRES, NOT A FIXED RULE, BUT "EQUITABLE READJUSTMENT" IN VIEW OF LONG STANDING DIFFERENTIALS IN PAY SCHEDULES, WITH DUE REGARD FOR THE FACT THAT PAY ROLLS ARE BEING HEAVILY INCREASED AND THAT EMPLOYEES WILL RECEIVE BENEFITS FROM SHORTER HOURS, FROM THE REEMPLOYMENT OF OTHER WORKERS, AND FROM STABILIZED EMPLOYMENT WHICH MAY INCREASE THEIR YEARLY EARNINGS.

AN EXAMINATION OF YOUR PAY ROLLS, BOTH BEFORE AND AFTER AUGUST 10, 1933, SHOWS THAT APPARENTLY YOU MADE NO INCREASE IN HOURLY PAY RATES AFTER AUGUST 10, 1933. APPARENTLY, THE ONLY CHANGE MADE BY YOU AFTER SIGNING THE PRESIDENT'S REEMPLOYMENT AGREEMENT WAS IN REDUCING THE NORMAL WORK WEEK FROM 50 HOURS TO 35 HOURS--- AT LEAST, THIS APPEARS TO FORM THE BASIS OF YOUR CLAIM FOR INCREASED OVERHEAD COSTS. NO INCREASE IN HOURLY RATES OF PAY APPEARS TO HAVE BEEN PUT INTO EFFECT AND THIS WOULD SEEM EVIDENT BY THE FACT THAT NO CLAIM IS MADE FOR INCREASED LABOR COSTS. IT IS NOTED THAT IN A LARGE NUMBER OF CASES YOU APPARENTLY WORKED YOUR EMPLOYEES IN EXCESS OF 40 HOURS A WEEK, AND THIS IS ATTEMPTED TO BE JUSTIFIED ON THE GROUND OF EMERGENCIES ON ACCOUNT OF BREAK-DOWNS IN EQUIPMENT AND ON THE GROUND THAT PERSONS IN AN EXECUTIVE CAPACITY RECEIVING OVER $35 A WEEK WERE EXEMPT. WHETHER OR NOT SUCH EXPLANATIONS ARE SATISFACTORY NEED NOT BE DETERMINED AT THIS TIME, AS THE CLAIM LEGALLY COULD NOT BE ALLOWED FOR OTHER REASONS, AS HEREINAFTER SET OUT.

IT IS APPARENT THAT IT WAS THE PURPOSE OF THE PRESIDENT'S REEMPLOYMENT AGREEMENT NOT ONLY TO DECREASE THE HOURS OF EMPLOYMENT SO AS TO SPREAD EMPLOYMENT AMONG A LARGER NUMBER BUT ALSO NOT TO DECREASE THE PURCHASING POWER, AND THAT THE PAY OF EMPLOYEES SHOULD BE READJUSTED SO THAT AN EMPLOYEE WOULD RECEIVE APPROXIMATELY THE SAME WAGE FOR A SHORTER WORK WEEK. CLEARLY, THAT COULD NOT BE ACCOMPLISHED BY REDUCING THE NORMAL WORK WEEK FROM 50 HOURS TO 35 OR 40 HOURS--- SUCH REDUCTION IN WORK WEEK APPEARING TO FORM THE BASIS FOR YOUR CLAIM -- AND NOT INCREASING THE HOURLY RATES OF PAY, BECAUSE BY DOING THIS THE WEEKLY PAY WOULD BE REDUCED. WHILE IT MAY BE THAT AN EXACT READJUSTMENT COULD NOT BE MADE IN EVERY CASE, SUCH FACT, IF IT BE A FACT, WOULD NOT EXCUSE A CLAIMANT FROM FAILING TO MAKE PROPER ADJUSTMENTS LOOKING TO COMPLIANCE.

UNDER THE PROVISIONS OF THE CITED ACT OF AUGUST 10, 1933, IT IS A CONDITION PRECEDENT TO ANY BENEFITS THEREUNDER THAT A CONTRACTOR HAVING A CONTRACT WITH THE UNITED STATES IN THE PERFORMANCE AFTER AUGUST 10, 1933, IN CONNECTION WITH THE WORK UNDER SUCH CONTRACT ENTERED INTO PRIOR TO SAID DATE, MUST HAVE COMPLIED WITH THE APPLICABLE APPROVED CODE OR CODES OF FAIR COMPETITION; OR IF NO CODE, THEN WITH THE PRESIDENT'S REEMPLOYMENT AGREEMENT. THE SAME RULE IS APPLICABLE TO A SUBCONTRACTOR UNDER SUCH A CONTRACT. THE EVIDENCE SUBMITTED IN SUPPORT OF YOUR CLAIM FAILS TO SHOW THAT THERE WAS SUCH COMPLIANCE BY YOUR WITH THE PRESIDENT'S REEMPLOYMENT AGREEMENT OR THE APPLICABLE CODE.

ACCORDINGLY, THE SETTLEMENTS DISALLOWING THE TWO CLAIMS REFERRED TO MUST BE, AND ARE, SUSTAINED.