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District Court of Appeal, Second District, Division 1, California.

MARVIN et al. v. HODGSON et al.*

Civ. 15942.

Decided: April 22, 1948

Herbert R. Lande, of San Pedro, for appellant. J. Paul Madsen, of Los Angeles, for respondents.

This is an appeal by defendant William E. Hodgson from a judgment in favor of plaintiffs for wages.

It appears from the record herein that prior to July 16, 1944, appellant was the sole shareholder, as well as the general manager, secretary and treasurer of a corporation known as Guards Association Inc., which was in the business of supplying guards and watchmen for certain of the ships of the War Shipping Administration while they were in port at Los Angeles or Long Beach. These guards, among whom were respondents, were paid a basic wage rate of 92 1/2¢ per hour for all hours worked with no increase for overtime. On July 15, 1944, appellant, doing business under the firm name and style of Guards Association, became the successor of Guards Association, Inc., a corporation; and at a meeting called by him on that day, appellant told the guards that he had been ordered by the National Labor Board to pay overtime wages after eight hours a day or forty hours a week; that he could not continue the 92 1/2¢ rate, plus overtime, and stay in business because he received from the War Shipping Administration only $1.05 per hour for guard service upon the ships, consequently, he would pay henceforth 70¢ per hour with time and a half for overtime and double time for hours worked on the seventh consecutive day.

Respondents worked at the reduced rate of 70¢ from July 16, 1944, to October 31, 1945, and on November 6, 1945, commenced the instant action, alleging as a basis for their cause of action that the reduction of rate from 92 1/2¢ to 70¢ was made without the approval of the National Labor Board and therefore void, that the regular rate of pay must as a matter of law be 92 1/2¢ per hour and that they were entitled to one and one-half times such rate of 92 1/2¢ for all hours worked over forty per week. Respondents also alleged that a violation of the Fair Labor Standards Act 29 U.S.C.A. § 201 et seq., thus occurred, and included a prayer for liquidated damages and attorney's fees.

The trial court found, among other things, that the change of the basic rate from 92 1/2¢ to 70¢ per hour was made without the approval of the National War Labor Board; that such approval was necessary under ‘General Order No. 6 and other rules and regulations of the National War Labor Board, the regulations of the Director of Economic Stabilization, the executive orders of the President, and the Stabilization Act of 1942’; that the basic wage rate of 70¢ as changed and paid by appellant to respondents was contrary to and in violation thereof; and concluded that the said change in respondents' basic wage rate from 92 1/2¢ to 70¢ per hour on and after July 16, 1944, by appellant, ‘was illegal and void and the applicable rate under the provisions of the Fair Labor Standards Act of 1938 in determining the regular rate at which plaintiffs were employed by said defendant from July 16, 1944 to October 31, 1945, was the rate of 92 1/2¢ per hour thereunto paid to plaintiffs by the corporation, Guards Association, Inc.’ Accordingly, judgment was entered in favor of each respondent for unpaid wages, being the difference between the amount figured at the lowered rate and that figured at the previous rate, as prayed for, together with an equal sum as liquidated damages and $150 attorneys' fees.

Appellant admits that he violated certain provisions of the Stabilization Act of 1942 (50 U.S.C.A.Appendix, secs. 961–971), the War Labor Disputes Act of 1943 (50 U.S.C.A.Appendix, secs. 1501–1511), Executive Order No. 9017 (50 U.S.C.A.Appendix, § 1507 note) and Executive Order No. 9250 (50 U.S.C.A.Appendix, § 901 note), when he changed the rate of pay without approval of the National War Labor Board, but he asserts that such acts and orders do not affect any legal relations nor do they create any justiciable rights between employer and employee for the reason that ‘the rules and regulations and directive orders of the National War Labor Board, made under and by virtue of the authority of the foregoing acts and executive orders, are advisory only.’

Respondents concede that the directives of the National War Labor Board ‘were in truth advisory only and were also criminally unenforceable’, but urge that the payment by appellant of any wage rate less than 92 1/2¢ per hour being in violation of the Stabilization Act, supra, such payment was illegal and void; hence, only the 92 1/2¢ rate can be deemed the ‘regular rate’ under the Fair Labor Standards Act.

The instant suit is primarily for the recovery of wages due to workmen pursuant to a contract of employment modified by statute, to-wit: the Fair Labor Standards Act of 1938 (29 U.S.C.A. secs. 201–219), section 207 of which directs that no employer shall employ any of his employees for a work-week longer than a specified number of hours ‘unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.’ Section 216(b) of said act provides that ‘Any employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. Action to recover such liability may be maintained in any court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarily situated, or such employee or employees may designate an agent or representative to maintain such action for and in behalf of all employees similarily situated. The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action.’

Executive Order No. 9250, supra, Providing for the Stabilizing of the National Economy, recites in Title II—Wage and Salary Stabilization Policy: ‘1. No increases in wage rates, granted as a result of voluntary agreement, collective bargaining, conciliation, arbitration, or otherwise, and no decreases in wage rates, shall be authorized unless notice of such increases or decreases shall have been filed with the National War Labor Board, and unless the National War Labor Board has approved such increases or decreases.’ Also, in Title III, thereof—Administration of Wage and Salary Policy, it is provided: ‘4. In order to effectuate the purposes and provisions of this Order and the (Stabilization) Act of October 2, 1942, (sections 961–971 of this Appendix), any wage or salary payment made in contravention thereof shall be disregarded by the Executive Departments and other governmental agencies in determining the costs or expenses of any employer for the purpose of any law or regulation * * * or for the purpose of calculating deductions under the Revenue Laws of the United States or for the purpose of determining costs or expenses under any contract made by or on behalf of the Government of the United States.’

Section 946 of the Stabilization Act of 1942, supra, provides that ‘No action shall be taken under authority of this Act with respect to wages or salaries, (1) which is inconsistent with the provisions of the Fair Labor Standards Act of 1938, as amended, or the National Labor Relations Act (Title 29, §§ 151–166) * * *.’

Section 1507 of the War Labor Disputes Act of 1943, supra, defining the functions and duties of the National War Labor Board, which was established by Executive Order No. 9017, supra, provides in subsection (a)(2) thereof that such Board shall have the power to decide labor disputes and ‘provide by order the wages and hours and all other terms and conditions * * * governing the relations between the parties, which shall be in effect until further order of the Board. In making any such decision the Board shall conform to the provisions of the Fair Labor Standards Act of 1938, as amended * * *.’

In Employers Group etc. v. National War Labor Board, 79 U.S.App.D.C. 105, 143 F.2d 145, 146, 148, a suit to annul and enjoin a ‘directive order’ of the National War Labor Board increasing wages of employees, the court upheld a judgment dismissing the complaint, stating: ‘It is clear and undisputed that no statute authorizes review of the War Labor Board's Orders. * * * The Inflation Control Act provides that ‘No employer shall pay, and no employee shall receive, wages or salaries in contravention of the regulations promulgated by the President under this Act.’ (50 U.S.C.A.App., sec. 965.) The regulations promulgated by the President in Executive Order 9250 forbid the adoption, without the Board's approval, of a new wage scale. But neither Executive Order 9250 nor any other regulation forbids adherence to an old wage scale after the Board has approved a new one. Appellants will not, by declining to adopt the new scale, subject themselves to the penalties which the Inflation Control Act provides for violation of its provisions, or to any other penalties.'

In Wernhardt v. Koenig, D.C., 60 F.Supp. 709, an action brought under the Fair Labor Standards Act of 1938 (29 U.S.C.A. sec. 201 et seq.) for overtime pay, it was held:

‘It appears from the complaint that the plaintiffs are employees of the defendants and are engaged in interstate commerce. It further appears from a letter from the National War Labor Board, dated March 4, 1944, which by agreement of the parties was considered by the Court as though incorporated into the pleadings, that the hourly rates, upon the basis of which this claim for overtime is made, were the result of a wage adjustment made by the employers without securing the approval of the National War Labor Board, in violation of the Wage Stabilization Law and regulations promulgated thereunder. Therefore, this complaint shows on its face that the recovery sought is based on an illegal contract. The Wage Stabilization Law provides in 50 U.S.C.A.Appendix, § 965:

“No employer shall pay, and no employee shall receive, wages or salaries in contravention of the regulations promulgated by the President under this Act.' This section makes plain the intent of Congress that such contracts are illegal and the Court can not and will not lend itself to the enforcement of a contract made to perform an act which is expressly forbidden by a law of the United States and arises from an illegal contract. Such a contract is not only unenforceable but void. Fitzsimons v. Eagle Brewing Co., 3 Cir., 107 F.2d 712, 126 A.L.R. 681. The result is that these plaintiffs can not base any claims on such agreements.'

Under the foregoing authorities, appellant's claim that the 70¢ rate was the regular rate of pay for the purposes of the Fair Labor Standards Act, supra, cannot be sustained. Since no regulation forbids adherence to an old wage scale, the original 92 1/2¢ wage scale must be deemed the regular rate, as that term is used in the Fair Labor Standards Act.

For the reasons stated, the judgment appealed from is affirmed.

YORK, Presiding Justice.

DORAN and WHITE, JJ., concur.