The opinion of the court was delivered by: KNIGHT
The plaintiff sues to enjoin the defendant from violating Sections 15(a)(1) and 15(a)(2) of the Fair Labor Standards Act of 1938, Title 29 U.S.C.A. § 215(a)(1) and (2). The defendant is a New York corporation engaged in the production, sale and distribution in interstate commerce of electric cranes, hoists, and allied products. It employs and has employed about 500 employees, and since on or about January 1, 1941, at different intervals during each year down to June 1, 1945, it has paid these employees certain alleged bonus payments. These were in addition to other types of bonus payments not in question here.
It is alleged that the bonus payments in question are part of the regular rates at which these employees were employed within the meaning of Section 7 of the Act aforesaid, 29 U.S.C.A. § 207; that defendant has repeatedly violated and is violating Sections 7 and 15(a)(2) of the Act in employing many of its employees for work weeks longer than 40 hours, without compensating them at rates not less than one and one-half times the regular rates at which they were employed, and further that defendant has repeatedly violated and is violating aforesaid Section 15(a)(1) in that since October 24, 1940, it has shipped, delivered, transported, offered for transportation and sold in interstate commerce goods in the production of which many of its said employees were employed.
Defendant denies committing any violations and as an affirmative defense alleges that the bonus payments in question herein do not constitute regular wages within the meaning of the aforesaid Act, but that all these have been completely discretionary with the management of the defendant as to the amount, time of payment, method of payment or whether payment were to be made at all, and 'hence, are not regular rates at which employees are employed.'
The decision of this case turns on the connotation of the term 'wages' as used in the Act. The only definition given in the Act reads as follows:
'(m) 'Wage' paid to any employee includes the reasonable cost, as determined by the Administrator, to the employer of furnishing such employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees.' 29 U.S.C.A. § 203(m).
The Administrator, in a published interpretative statement, has included bonus plans as falling within two general categories, as follows:
"A. In bonus plans of the first category, the payment and the amount of the bonus are solely in the discretion of the employer. The sum, if any, is determined by him. The employee has no contract right, express or implied, to any amount. This type of bonus is illustrated by the employer who pays his employees a share of the profits of his business or a lump sum at Christmas time without having previously promised, agreed or arranged to pay such bonus. In such case, the employer determines that a bonus is to be paid and also sets the amount to be paid.
"Bonus payments of this type will not be considered a part of the regular rate at which an employee is employed, and need not be included in computing his regular hourly rate of pay and overtime compensation." Walling v. Richmond Screw Anchor Co., 154 F.2d 780, 782.
Payments made under category B are considered by the Administrator a part of the regular rate of pay (quoted at pages 782, 783 of 154 F.2d).
Defendant contends that the bonus payments in question fall within category A, and quotes prior interpretative statements of the Administrator, which use the same language as that just quoted. This language is also found in the U.S. Department of Labor release, dated February 5, 1945, attached to plaintiff's brief.
In Walling v. Wall Wire Products Co., 6 Cir., 161 F.2d 470, at page 475. It is said: 'While the interpretative bulletins are not issued as regulations under statutory authority, they do carry persuasiveness as an expression of the view of those experienced in the administration of the Act, and acting with the advice of a staff specializing in its interpretation and application. See Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, note on page 580, 62 S. Ct. 1216, 86 L. Ed. 1682.'
The pertinent facts of the instant case have been stipulated in writing.
In December of 1936, 1937 and 1939, defendant paid bonuses of $ 20 to employees whose rates were 54 cents an hour or less; of $ 25 to those with rates of 55-64 cents an hour; of $ 30 to those with rates of 65-74 cents an hour; $ 35 to those with rates of 75 cents an hour or more. Employees hired after July 1 and before October 1 of each of those years received $ 10. Those hired after October 1 received no bonus.
These three bonuses were paid pursuant to resolutions of defendant's board of directors dated 11/17/36, 11/16/37 and 11/21/39. These resolutions were unanimously carried. All three read as follows: 'Resolved, That additional compensation for services rendered be paid before Christmas to all hourly rate employees who are on the payroll at the time of this payment, such compensation to be calculated on a basis determined by the management, the amount in total not to exceed (respectively $ 8,000, $ 10,000, and $ 7,800).'
On August 21, 1940, the following resolution was carried: 'Resolved, That additional compensation for services rendered be paid the last week in August to hourly rate employees, such compensation to be calculated as in the past on a basis determined by the Management, the amount in total not to exceed one week's normal pay.' This bonus was paid on August 29, 1940, the amount and basis being the same as in the years 1936, 1937 and 1939. Employees hired after March 1, 1940, but before June 1, 1940, got $ 10. Those hired after June 1, 1940, got nothing.
On November 19, 1940, a similar resolution was carried, providing that the payment be made in December. The same kind of bonus was paid on December 19, 1940. Employees hired after July 1, 1940, but before October 1, 1940, got $ 10. Those hired after October 1, 1940, got nothing. 'In addition to the regular authorized payments, $ 10.00 was added to those employees with service of five years or over and $ 5.00 to those employees in the defendant's service from three to five years.'
On February 18, 1941, a similar resolution was carried, providing that the payment be made on February 27. On that date the same kind of bonus was paid. Employees hired between September 1 and December 1, 1940, got $ 10. Those hired after December 1, 1940, got nothing.
On May 12, 1941, the following resolution was carried: 'Resolved, That additional compensation for services rendered be paid May 22, to hourly rate employees, such compensation to be calculated on a basis determined by the management.' On that date the dame kind of bonus was paid. Employees hired between December 1, 1940, and March 1, 1941, got $ 10. Those hired after March 1, 1941, got nothing.
By similar resolutions bonuses in the same amounts and based on the same wage categories were paid to all hourly rate employees on July 2, August 19, October 23 and December 18 of the year 1941. Bonuses were paid on April 2, 1942, based on a graduated scale, ranging from $ 30 to those employees whose wage rates were 40 cents an hour or less, to $ 79 to those whose wage rates were $ 1.05 and above. On July 2, 1942, bonuses were paid on a new graduated scale, ranging from $ 40 to those employees whose wage rates were 40 cents an hour or less to $ 100 to those whose wage rates were $ 1.01 an hour to $ 1.05 and more. This new wage category was used in the bonus payments made on October 1 and December 17 of the year 1942, on April 1, July 1, September 30 and December 16 of the year 1943, and on March 30, June 29 and September 28 of the year 1944. Bonus payments on a new graduated scale, ranging from $ 32 to employees whose wage rates were 40 cents an hour or less, to $ 80 to those whose rates were 96 cents an hour and above, were made on December 21, 1944, and on March 29 and June 28 of the year 1945. Except on August 19, 1941, additional bonus payments in flat sums were made to a few key hourly rate employees. None of these exceeded $ 125.
These bonus payments were made to employees who were on defendant's payroll on a date specified in each resolution. Those who were employed between recent specified dates got only $ 10. Those who were later employed got no bonus.
In connection with the bonus payment made on April 1, 1943, 'The following instructions approved by S. Buckley, president of the defendant, were issued by the defendant relative to the bonus payments being made:
"Re Victory Tax -- Bureau of Internal Revenue circular V. T. page 3 refers to bonuses. We assume from this, that the bonus will carry a 5% tax on total amount unless the regular pay is less than $ 12.00 for the week, in which case make up the balance of the $ 12.00 out of the bonus."
'The following instructions were issued by the defendant with relation to the bonus payments to be made of September 30, 1943 * * *
"Re: Withholding Tax -- Bonuses will carry a straight 20% Withholding Tax when paid on a regular weekly pay period unless the party receiving the bonus has no regular earning for that pay ...