The opinion of the court was delivered by: ZAVATT
An order of this court dated July 14, 1959, permanently enjoined the defendants herein, All-States Business Products Corporation (hereinafter "All-States") and Arthur Kunzweiler, the president of All-States from the date of incorporation to March 15, 1963 (hereinafter "Kunzweiler"), from violating the Fair Labor Standards Act, as amended, 29 U.S.C. §§ 201-219 (hereinafter the "Act"), in the following pertinent respects:
"(2) Defendants shall not, contrary to Section 7 of the Act, employ any of their employees, engaged in commerce or in the production of goods for commerce, as defined by the Act, for a work-week longer than forty (40) hours, unless the employee receives compensation for his employment in excess of forty (40) hours at a rate not less than one and one-half times the regular rate at which he is employed.
(4) Defendants shall not fail to make, keep and preserve adequate and accurate records of their employees, and of the wages, hours and other conditions and practices of employment maintained by them, as prescribed by the regulations of the Administrator of the Wage and Hour Division, United States Department of Labor, issued and from time to time amended, pursuant to Section 11(c) of the Act and found in Title 29, Chapter V, Code of Federal Regulations, Part 516."
Section 778.3(4) of said Regulations provides:
"(4) Salaried employees-general. If the employee is employed solely on a weekly salary basis, his regular hourly rate of pay, on which time and a half must be paid, is computed by dividing the salary by the number of hours which the salary is intended to compensate."
Section 778.16 of said Regulations provides:
"Overtime compensation cannot be said to have been paid to an employee unless all the straight-time compensation due him under his contract (express or implied) or under any applicable statute has been paid."
The parties stipulated before the Master that All-States has been engaged in commerce and in the production of goods for commerce within the meaning of the Act.
On June 10, 1964, James P. Mitchell, Secretary of Labor (hereinafter "plaintiff"), moved the court for an order adjudicating the defendants in civil contempt of court by reason of their failure and refusal to obey the above quoted provisions of said order and imposing a compensatory fine in an amount equal to the difference between what the defendants had actually paid to their employees and the amount the defendants should have paid had they obeyed the said order. The plaintiff asked that the fine be paid to him for distribution to the employees entitled thereto and that said compensatory fine also include an amount sufficient to reimburse the Secretary of Labor for the costs and expenses of investigating, instituting and maintaining this proceeding.
The court referred the matter to Richard B. Cooper of 30 Rockefeller Plaza, New York, New York, as Master to hear and report. Mitchell v. All-States Business Products Corp., 232 F. Supp. 624 (E.D.N.Y. 1964). The order of reference, dated July 14, 1964, directed the Master to hear and to report to the court his findings of fact and conclusions of law upon the following requests made by the plaintiff:
"(1) That the respondent All-States Business Products Corporation and the respondent Arthur Kunzweiler be adjudicated in civil contempt of this Court by reason of their failure and refusal to obey the judgment of this Court entered on July 14, 1959.
(2) As remedial action, to compensate the Secretary of Labor for the deprivation of the relief granted to him by the said judgment of the Court, brought about by the respondents' contumacy, that the Court impose a compensatory fine in an amount equal to the difference between what the respondents have actually paid to their employees subsequent to the entry of the Court's judgment, and the amount the respondents should have paid their employees had they not failed and refused to obey the judgment of the Court; that the Court order such amount paid to the Secretary of the United States Department of Labor for distribution to the employees entitled thereto under the provisions of the said judgment.
(3) That the compensatory fine also include an amount sufficient to reimburse the Secretary of Labor for the costs and expenses of investigating, instituting and maintaining this proceeding."
The Master filed his report on May 26, 1965. This matter is now before the court upon the several motions of the parties, pursuant to Rule 53(e)(II) of the Federal Rules of Civil Procedure, for ...