Representatives, the Honorable James P. Mitchell, Secretary of Labor. cited President Dwight D. Eisenhower's continuing support for this basic legislation. Secretary Mitchell stated:

In his first economic report, issued in January 1954, President Eisenhower said that: "An effective minimum wage program should cover millions of low-paid workers now exempted."

In his 1955 report, the President indicated that: "the coverage of the minimum wage is no less important than its amount."

In 1956, he stated that: "the need for an extension of coverage remains, and the Congress is again requested to proceed as far as is practical in this direction."

This request was repeated in 1957, 1958, and 1959, and in his last report the President reiterated that: "the Congress is again requested to extend coverage of the Fair Labor Standards Act to several million workers not now receiving its protection."

In a special message to the Congress on February 2, 1961, President John F. Kennedy recommended a minimum wage increase and expanded coverage of the Fair Labor Standards Act of 1938. President Kennedy declared:

This will improve the incomes, level of living, morale. and efficiency of many of our lowest paid workers, and provide incentives for their more productive utilization. This can actually increase productivity and hold down unit costs, with no adverse effects on our competition in world markets and our balance of payments.

Now in its third decade the Act has meant much to many-greater dignity and security and economic freedom for millions of American workers, and an upswing in economic growth for the country as a whole.

However, as the President of the United States, Lyndon B. Johnson, stated in his message to the Congress of May 18, 1965:

Many American workers whose employment is clearly within the reach of this law have never enjoyed its benefits. Unfortunately, these workers are generally in the lowest wage groups and most in need of wage and hour protection. We must extend minimum wage and overtime protection to them.

It is the committee's intention to extend the Act's coverage in such a manner as to completely assume the Federal responsibility insofar as is presently practicable and to raise the minimum wage to a level which will prevent the disgraceful and intolerable situation of workers and their families dwelling in poverty.

THE PRESENT ACT

At the present time half of the Nation's wage and salary workers are outside the coverage of the Act. The law presently covers only 29.6 [7] million of the 60 million wage and salary workers in the United

States. A large number of these 60 million are beyond the scope of the Act's practical, possible, or needed coverage. But of the 47 million workers who might be brought within the coverage of the wage and hour guarantees, 171⁄2 million are not in fact covered.

TABLE 4.-ESTIMATED NUMBER OF NONSUPERVISORY EMPLOYEES COVERED UNDER THE FAIR LABOR STANDARDS ACT OF 1938, BY INDUSTRY

There is good reason for noncoverage of some of these 17%1⁄2 million workers who have not been brought within the protection of the Act. Some are in occupations where virtually all wage rates are already higher than any practical minimum wage level. Many others are employed in enterprises too small to make coverage practicable. And still others are engaged in occupations which are intrastate in character, and apparently do not affect interstate commerce.

The Act covers any employee who is not specifically exempted, who in any workweek is engaged in commerce or in the production of goods for commerce, inclusive of employees engaged in work "closely related" and "directly essential" to such production, and every employee who in any workweek is employed in an enterprise engaged in commerce or in the production of goods for commerce.

The Act, therefore, has two bases of coverage. It applies to employees, not specifically exempt, who are

(1) Engaged in commerce or in the production of goods for commerce. The term "commerce" is defined to include both incoming and outgoing foreign commerce, as well as commerce between the States. The term "production" of goods includes not only the actual production operations, but also "any closely related process or occupation directly essential" to such production. The term "goods" includes any part or ingredient thereof, or

(2) Employed in "an enterprise engaged in commerce or the production of goods for commerce." In general, the definition of such an enterprise (in section 3 (s) of the Act) is based on annual dollar volumes of business and types of businesses. Under this category of coverage all the employees of such an enterprise will be covered by the Act, regardless of the relationship of their individual duties to commerce or the production of goods for commerce. Where a business does not fit into the definition of such an enterprise, certain individual employees of such business [8] may, nonetheless, be covered if they qualify under the test of coverage established in 1938.

An "enterprise" is presently defined as:

the related activities performed (either through unified operation or common control) by any person or persons for a common business purpose, and includes all such activities whether performed in one of more establishments or by one or more corporate or other organizational units including departments of an establishment operated through leasing arrangements, but shall not include the related activities performed for such enterprise by an independent contractor. Related activities conducted by separate business entities will be considered a part of the same enterprise where they are joined either through unified operation or common control into a unified business system or economic unit to serve a common business purpose. Activities are considered related when they are the same or similar, such as those of the individual retail or service store in a chain, or departments of an establishment operated through leasing arrangements; when they are auxiliary and service activities, such as central office and warehousing activities and bookkeeping, auditing, purchasing, advertising, and other services; and, when they are part of a vertical structure, such as the manufacturing, warehousing, and retailing of a particular product or products under unified operation or common control for a common business purpose.

Those businesses which are unrelated to each other are separate enterprises. For example, if a single company owns several retail apparel stores and is also engaged in the lumbering business, the sales of the lumbering business would not be included in the annual dollarvolume in determining whether the dollar-volume test under section 3(s) has been met.

Related, even if somewhat different, business activities, can, however, frequently be part of the same enterprise. For example, a bank may, either directly or indirectly, engage in real estate and leasing activities incidental to or arising from its financial and investment activities. These activities, having a reasonable connection with banking, would be considered related.

Also, the operations through substantial ownership or control of a number of firms engaged in similar types of business activities constitute, in the committee's view, related activities performed through unified operations or common control within the meaning of the definition of enterprise. The fact that the firms are independently incorporated or physically separate or under the immediate direction of local management, as in Wirtz v. Hardin, 16 Wage Hour Cases 722 (N.D. Ala.), is not determinative of this question.

However, an independently owned retail or service establishment will not lose its status as a separate and distinct entity because it occupies premises leased to it by a person who also leases premises to other retail or service establishments, or by reason of an arrangement which includes an agreement that it (1) will sell, or sell only, certain goods specified by a particular manufacturer, distributor, or advertiser; (2) will join with other such establishments in the same industry for the purpose of collective purchasing; or (3) will have the exclusive right to sell the goods or to use the brand name of a manufacturer, distributor, or advertiser within a specified time.

[9] In keeping with the broad statutory definitions of the coverage phrases used, the courts have tedly expressed and adhered to the

principle that the coverage phrases should receive a liberal interpretation, consonant with the definitions, with the purpose of the Act, and with its character as remedial and humanitarian legislation.

However, despite the Act's broad coverage terms and the courts' liberal interpretations regarding coverage and restrictive interpretations regarding exemptions, there is great need for extending the present coverage of the Act to large groups of workers whose earnings today are unjustifiably and disproportionately low. There is a significant correlation between poverty earnings and exclusion from the protective provisions of the Act. Among family heads employed in industries generally covered by the Act, only 5 to 10 percent had annual incomes under $3,000 in 1963. The figure is 8 to 14 percent in industries where there is partial coverage of the Act. But in industries where there is little or no coverage, the proportions jumped to 33 and 49 percent, respectively.

Also, it is imperative, if the Act is to have real meaning, that the minimum wage provide earnings above the poverty level. It is a shocking fact that demands immediate remedy that 40 percent of all children living in poverty were in families where there was a worker who had a full-time job throughout the year. Full employment, and equal employment opportunity, are now widely endorsed objectives, but to be employed equally at substandard wages is no social achievement at all. The "minimum standard of living necessary for health, efficiency, and general well-being of workers" must be attained.

The Act was a commitment to improve living standards by eliminating substandard working conditions in employment subject to the Federal jurisdiction over interstate commerce. That commitment, incomplete when it was made, has become less complete with the passage of years. The law has not been kept in line with the advancing economy and some of its guarantees mean less comparatively than they did 27 years ago. The Fair Labor Standards Amendments of 1965 are intended to rectify this situation with all deliberate speed consistent with the policy of the Act and the welfare of the American people.

Title I-Definitions

BRIEF SUMMARY OF PROVISIONS

Section 101. Tips.-Provides that the wage paid by an employer to a tipped employee shall be deemed to be increased on account of tips by the amount of tips received by the employee and accounted for in any manner, or by an average amount determined by the Secretary of Labor for specific classes of employees and establishments, and in defined areas, which ever is greater; but such amount shall not exceed 50 percent of the applicable minimum wage rate. Directs the institution of a procedure for reconsideration of the amount attributed as tips upon petition by an interested person.

Defines "tipped employee" to include an employee who customarily and regularly receives tips if tips have been generally recognized as constituting a substantial part of the income of the employees in the occupation in which such employee is employed. Provides that a tipped employee's regular rate of pay, for purposes of calculating over[10] time compensation, shall not include the amount which was added to his wages on account of tips to the extent that such amount, together with his other wages exceeds the applicable minimum wage rate.

Section 102. Definition of enterprise.-Amends definition of "enterprise" and "employer" to include public and private, proprietary and nonproprietary hospitals (excluding Federal Government hospitals) and related institutions and, also, institutions of higher education. regardless of whether or not such institutions are public or private or operated for profit or not for profit.

Also amends the definition of an "enterprise engaged in commerce or in the production of goods for commerce" to include an enterprise which has employees engaged in commerce or in the production of goods for commerce and which (1) during the period January 1, 1966, through December 31, 1967, has an annual gross volume of sales of not less than $500,000, or is a gasoline service establishment with an annual gross volume of sales of not less than $250,000, (2) beginning January 1, 1968, has an annual gross volume of sales of not less than $250,000, or (3) is a laundry or drycleaning enterprise or a construction enterprise. There is no dollar volume test for laundries, drycleaning. or construction enterprises. "Mom and pop" establishments remain excluded. Individual retail or service establishments with annual sales of less than $150,000 are excluded under the amendment made to section 13(a) (2) of the Act.

Section 103. Agricultural employees.-Excludes from definition of employee "the parent, spouse, child, or other member of the agricultural employer's immediate family." Defines "man-day" to mean any day during which an employee performs agricultural labor for the employer.

Title II-Revision of exemptions

Section 201. Hotel, restaurant, motion picture,__ and recreational establishments; hospitals and related institutions. Repeals the minimum wage and overtime exemptions for such establishments (except that seasonal resorts and seasonal recreational and amusement establishments maintain overtime exemptions).

Exempts any employee employed by any retail or service establishment (but not employees of laundries or drycleaning establishments) which are doing less than $150,000 of business annually.

Section 202. Laundry and drycleaning establishments.-Repeals minimum wage and overtime exemptions.

Section 203. Agricultural employees.-Amends minimum wage exemption to maintain such exemption for agricultural employees employed by the same employer on other than a seasonal or temporary basis (that is, less than 12 consecutive weeks) unless such employer uses more than 300 man-days of such labor in any calendar quarter (approximately five permanent agricultural laborers). Maintains overtime exemption for agricultural employees, including livestock auctioneers.

Section 204. Agricultural processing employees.-Repeals minimum wage and overtime exemption for agricultural processing employees in the "area of production"; repeals minimum wage but maintains overtime exemption for employees of country elevators located in "area of production"; repeals minimum wage but maintains overtime exemption for cotton ginning employees; repeals minimum wage and overtime exemption for tobacco processing employees; repeals minimum [11] wage but maintains overtime exemption for certain fruit and vegetable transportation employees.