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#f3?t. // 



BOSTON PUBLIC LIBRARY 



3 9999 06317 380 9 



OFFICE OF NATIONAL RECOVERY ADMINISTRATION 
DIVISION OF REVIEW 



THE OWNER-OPERATOR PROBLEM AND THE 
NATIONAL RECOVERY ADMINISTRATION 



By 



Maurice Rabinovitz 



( A Section of Part D: Control of Other Conditions of Employment; 



Ml 



WORK MATERIALS NO. 45. 
THE LABOR PROGRAM UNDER THENIRA 



Work Materials No. 45 falls into the following parts: 



Part A 
Part B 
Part C 
Part D 
Part E 



Introduction » 

Control of Hours and Reemployment 
Control of Wages 

Control of Other Conditions of Employment 
Section 7 (a) of the Recovery Act 



LABOR STUDIES SECTION 
March, 1936 



office of national recovery administration 
division of 23v i ew 



THE OWNER-OFERATOE PROBLEM AND THE 
NATIONAL RECOVERY ADMINISTRATION 



3y 

Maurice Rabinovitz 



LAB.OR STUDIES SECTION 
March, 1936 



9335 



"• S. UBMRY OF CONGRESS 

NOV 30 1950 



FOREWORD 

This study on "The Owner-Operator Problem and the National Recovery 
Administration" w.is prepared "by Mr. Maurice Rabinovita of the Labor 
Studies Section, Mr. Solomon Barkin in charge. 

In many instances the success of code labor provisions depended 
upon their observance "by the employer not only with, respect to his em- 
ployees hut also with respect to his own working time if he was an 
"owner-operator" . Various provisions were developed to assure compli- 
ance with the labor provisions by employers when acting as employees. 
Varying methods of enforcement were utilized. Tnis study represents 
an outline of the more outstanding ERA experiences. All regulation of 
conditions of employment in industries where the number of owner oper- 
ators is significant will encounter this problem. The findings of this 
particular study are of course those of the author and not official 
utterances . 

At the back of this report will be found a brief statement of the 
studies undertaken by the Division of Review. 



L. C. Marshall 
Director, Division of Review 



March 23, 1936 



9835 -i- 



TABLE OF CCTTVyTS 

Page 

INTRODUCTION 1 

CHAPTER I . NATURE AND SCOPE 01 THE PRQELEfc. 2 

l. Extent of Owner-Ope rr tor Competition 3 



a 



1. Service Trades 4 

2. Commercial Tracking 

3. Retail Trade 11 

«t. Other Trades ^nd Industries 14 

a. Food Industries 14 

D. Graphic Arts Industries 15 

c. iuanuf acturing Industries 15 

d. Building Construction Industries 16 

E. Proolems of Control 18 

C. Owner-Operator Regulation prior to NRA 19 

CHAPTER II . THE NRA PROGRAM OF CONTROL 26 

A. Control of Working Hours rnd Wages of Owner-Operators as a 
Means of Attaining "IRA Objectives 26 

B. Initial Attempts at Control Under Temporary Codes 

(PRA Substitutions) 27 

C. Regulation Through Provisions in Codes of Fair Competition 

... 50 

D. Specific Problems of control for Which Code Clauses Were 
Urged 31 

1. The Fluctuating Contractor-Journeyman 31 

2. Multiplicity of Working Partners in Small Enterprises 32 

3. Subterfuge Through Cooperative Enterprises and 

Family Corporations , 37 

4. Effect of Working Proprietors Upon Pe~k and Slack 
Periods 41 

5. Need for Special Regulations to Govern Starting and 
Finishing Periods of "'ork 43 

6. Wages and Other Compensation for Owner-Operators and/ 

or Members of Their Families 46 



9835 - ii 



TABLE 0? CONTENTS (Cont'd) Page 

E. Tnbulat ion of KRA Code Provisions Affecting Owner-Opera- 

tors 48 

1. Hours Provisions Tabulation 48 

2. Wage Provisions Tabulation 49 

F. NRA POLICY on Subject of Owner-Operator Control 50 

1. Influence of Groups Within UEA 51 

a. Labor Advisory Board 51 

b. Legal Division 53 

c. Industrial Advisory Board 55 

d. Consumers Advisory Board 57 

e. Advisory Council 58 

G. The Control Program in Oper- tion 65 

1. Problems in Enforcement 65 

a. Lisunderst^nding as to Scope of the Control 
Devices , 66 

b. difficulty of Detecting and Proving Violations 66 

c . Legal Restraints 67 

d. Public Opinion and the "Little Fellow" 69 

2. Summary of Available Enforcement Data , 70 

CHAPTER III. AIT APPRAISAL OF THE PROBLEM AM) THE PROGRAM. 72 

A. Some Questions and Answers 72 

1. Necessity of a. Control program? 72 

2. Success of the Particular Program? 74 

3. '"'eaxnesses of the Program? 76 

B. Supplement-Suggestions for Further Study 79 

APPENDICES 

A. Tables 1-4, Inclusive, Selected Leading Service Trades . 85 

B. Tables 5 & 6, Commercial Trucking 89 

C. Tables 7-10, Inclusive, Retail Trade 91 



9835 - iii - 



TAB LE OF CMETENT S (Cont'd) Page 

D. Tables 11 & 12, Selected *ood Industries 97 

E. Tables 13 & 14, Graphic Arts Industries 100 

F. Tables 15 & 16, Manufacturing Industries 101 

G. Tables 17 & 18, Building Construction Industries 103 

H. "Francis Barbier, Plaintiff in Error v. Patrick Connolly, 
113 U. S. 27 - City Ordinance - Validity of - Power of 
Federal Tribunal - Police Power of State" 109 

I. Listing of Code Hours and Wage Clauses Affecting Owner- 
Operators 114 

J. NRA Legal Research fcemorpndum -175 - Concerning Hours of 

Labor Restrictions Upon Individual Entrepreneurs 120 

K. Tables 19 & 20 - Summary of Violation of Code Control 

Clauses Affecting Oner-Operators 126 



9835 



iv - 



~1~ 



IKTRODUCTIOil 



The attempt of NRA to achieve the objectives of reducing unemploy- 
ment, providing workers a higher standard of living, improving conditions 
of work, and raising the plane of competition presented a difficult issue 
in control of the owner-operator . The Act specifically provided that 
the program of control under j'TRA should not operate to oppress or dis- 
criminate against small enterprises (Sec. 3, (a) (2), and prevent an 
individual from pursuing the vocation of manual labor and selling or 
trading the products thereof. (Sec. -5.). Popular -interest was also 
quite jealous of the "rights of the little fellow." Despite those 
limiting conditions, the role of the owner-operator in determination 
of Doth labor and trade practice standards was sufficiently important 
to lead FRA to attempt regulation. 

This study is an analysis of ITRA experience with owner-operator 
control, with special reference to the control of hours of work and re- 
employment. AH told, provisions we're introduced in some 105 codes of 
fair competition to control the maximum number of hours which' pro- 
prietor-workers were allowed to devote to "productive work" as dis- 
tinguished from managerial activities, as well as. to regulate the 
starting and finishing hours of work .of proprietors and employees. 

The problem of regulating the owner-operator arose early in IIRA 
history in connection with substitute labor standards under the Presi- 
dents Reemployment Agreement, and in negotiations for codes, in cases where 
industry representatives and/or labor leaders insisted that control 
provisions' be included to help eliminate certain kinds of alleged unfair 
competition, protect labor standards, and' effect a satisfactory measure 
of reemployment. . 



9835 



-2~ 

CHAPTER I. . 

.NATURE A¥I> SCOPE 0? THE • PROBLEu . 

Industry in general is dominated lay large scale ■ establishments and 
cBntrally controlled groups of. establishments under corporate and hold- 
ing company charters. Such structural groups employ a majority of the 
wage earners and account for the hulk of the value added by manufacture. 
In the field of retail trade, concentration in large units, although 
less marked, is still an outstanding feature. Despite the dominance of 
large employing units, however, the small business unit still predomin- 
ates in number, and in numerous lines of "business is still a factor of 
importance. Of these small enterprises, a large number are owner oper- 
ated. 

It is. not the purpose of this study to inquire into the experience 
of ERA with small husiness units in general, but to concentrate .atten- 
tion on the owner operator type of small establishment. The essence 
of the distinction is that the owner operator is himself typically a 
worker. He may operate as a lone workman or be assisted, occasionally 
or even permanently by members of his family and/or outside workers. 
Thus, in a barber shop the owner operator works at the trade and manages 
the shop; in a retail store he stands behind the sales counter; as a 
master plumber or electrician, in addition to managing the business he 
helps to install and repair fixtures; as a bakery operator he both bakes 
and sells; and in a printing shop he solicits trade and sets type. 

There is a wide variety of types of owner-operators, the differences 
being largely determined by the nature of the trades or industries in which 
they are engaged. As reflecting differences in the problem of control, 
three types of owner-operators may be distinguished; (l) the one-man 
operator, (2) the family operator and (3) the employer-operator. 

The one-man operator performs all the work himself. The industries 
and trades designate him by a variety of titles. In the tile industry 
he is the "wheel-barrow contractor', 1 ; in photography, "bathtub operator"; 
in printing "bedroom operator"; in the brCom industry, "a buckeye"; in 
moving picture, "the portables"; barber trade, "one chair shop"; trucking, 
"fly by night operator"; electrical industry and bituminous coal, "snow 
bird"; and dental laboratory, "one-man laboratory." 

The small family establishment is an elaboration of the one-man 
operator unit. In some types of business pesk loads or concurrent act- 
ivities requiring close attention make one-man operation impossible or 
impracticable. The corner grocery and the retail bake shop are illus- 
trations. In other cases, home work or shop work with family assistance, 
as may be found for example in the embroidery trade, makes possible some 
degree of specialization and larger family income. 

The employer-operator employs either permanently or occasionally 
one or more assistants outside the family circle. The number of such 
workers seldom exceeds five. This limit is set somewhat arbitrarily, 
but typically the employer of more than five permanent workers, himself 
becomes primarily a proprietor or manager rather than to continue to make 
a hand in the establishment. 

9835 



-3- 

In some lines of business the employer operator retains workers on a 
relatively permanent basis, but in other lines of business, for example 
construction work, employment tends more commonly to be on a job basis. 
A considerable amount^ of shifting of status occurs between employee and 
owner-operator. Journeymen, unable to obtain regular employment frequently 
become "self employed." journeymen, and owner-operators in great numbers 
shift to the status of employees. 

A. EXTENT Off Offi S ER-CHSlATOa COLIESTITIGH 

Data are not available by which it. is possible to make an exhaustive 
analysis of the numerical and competitive importance of the owner-operator 
type of unit in different lines of industry and trade. Since 1919 the census- 
es of manufacture do not cover establishments whose gross income is less than 
-35,000. per annum. The earnings of most owner-operators fall below that 
amount. ■ The owner- ope rater type of establishment does not lend itself to the 
collection of factual data. Pew such establishments maintain records necess- 
ary to accurate and detailed reports, furthermore, a considerable proportion 
of such business units are not listed in directories and consequently are not 
approached for information. 

Trade association data are by no means complete and they do not always 
reflect unbiased viewpoints. The case of the dental laboratory industry 
may be cited as pn example. Data presented by the leading trade association 
differ markedly from those submitted by an organization which purposted to 
represent the owner-operators r Whereas, the former estimated the number of 
one-man laboratories, to be approximately 1,150 in a total of 3,225 establish 
ments, the latter alleged that ,r the predominating majority of units in this 
industry are of the one-man type. 

The lack of specific information about industries in which casual in- 
formation indicates the owner-operator is a significant factor, constitutes a 
major source of difficulty in analyzing the problem, and of developing methods 
of dealing with it. The fact that some 105 codes contained provisions pre- 
dicated on the assumed necessity of Controlling the operating hours of the 
working employers -and members of their families is evidence of the widespread 
character of the problem. The limitations of this study, and paucity of in- 
formation do not permit analysis of ever;/ industry in which control provisions 
were inserted in codes. Enough is known, however, to establish the fact that 
in many instances code provisions were introduced for industries in which the 
owner operator problem was by no means acute. The following statistical 
analysis is limited to industries in which the nroblem of owner-operator is 
known to have "oeen a relatively acute issue. 

The industries studies, fall into the following groups: (l) service 
trades; (2) trucking; (3) retail trades; (4) food manufacturing; (5) graphic 
arts; (6) manufacturing, (a.) specialty-jo-b order, (b) standard stock; 
(7) construction. 



9835 



-4^ 

1 . Service Trades 

The verv nature of service establishments, consisting of such enter- 
prises as barber shops, beauty parlors, shoe rebuilding establishments, 
hand laundries, window cleaning service, shoe-shine establishments, in 
addition to a large number of others, encourages the existence of small units. 
The competition in this field centers among the small units themselves. The 
word "large" when applied to a service trade is a relative term inasmuch as 
three or four workers constitute a fairly substantial personnel. 

The income of service establishments and the profits and earnings of 
their proprietors and workers are small. This fact is suggested by 
analysis of the U. S. Census report for 1933 covering a large number of 
service occupations and trades, including personal services, business ser- 
vices, mechanical repair services, and a large miscellaneous group., (*) 

Out of e total of 443,217 establishments surveyed within the service 
group, 227,440 or approximately 51$ of the total reported annual gross 
receipts for 1933 as ranging between $1,000 to $5,000 per establishment; 1 . , 
161,202 establishments or 36-4/10$ of the total reported receipts of less than 
$1,000 per establishment; thus 388,642 or 87-7/10$ of the total number of 
establishments surveyed reported earnings of less than $5,000 for that year. 

Undoubtedly a substantial number of the establishments surveyed were 
in the category of small enterprises and not strictly one-man operator units. 
Many of the establishments employed one, two, or perhaps more persons. It may 
be questioned whether the receipts of such establishments covered a. livelihood 
to the proprietor or to his workers. The average annual earnings of the 
employed personnel reported for these trades was so low as to raise these 
questions. 

The following four service trades are used to illustrate the extent of 
the owner-operator problem in this field: (l) barber trade, (2) cleaning and 
pressing trade, (3) shoe rebuilding trade, (4) beauty shop trade. These cases 
are selected because of all the personal service trades enumerated by the Censi; 
of American Business (Service, Amusements and Hotels, 1933), they are the 
most important in the number of establishments, proprietors and employees. An 
analysis of the relationship between the number of' units and the distribution 
of annual gross receipts emphasizes the highly competitive nature of these 
small owner-operated enterprises and the probable effect of such intensive 
competition upon the income of proprietors and. earnings of workers in these 
trades. 



(*) Census of American Business, 1933, Services, Amusements, and Hotels 
Published May, 1935, U. S. Sept. of Commerce. 



9835 



-5- 

This analysis is statistically/ presented "by Tables I, II, III, and IV. 
(Appendix A) 

Table I indicates that the overwhelming majority of establishments 
in these important service- trades are owner-operated. This fact is indi- 
cated by the column "average full time employees per establishment. " 
Only one of the four trades - beauty shops, averaged one employee per 
establishment,, barber shops and cleaning trades, each averaged slight- 
ly more than one-half of one employee per enterprise,, The shoe rebuild- 
ing trade, which is practically dominated by one-man operator establish- 
ments, showed an av,erage of only c 2Sfo full time .employee per establish- 
ment. 

The slight excess of proprietors over the number of establishments 
indicated by Table I is explained by the existance of partnerships and 
cooperatives. Fart-time employees included in Table I represents persons 
'employed only a few hours or days of the normal work week or other pay- 
roll period. ; . 

Table II, "Distribution of Establishments by volume of Receipts" 
shows two important facts. The first is that most, of the establishments 
enumerated are in the group reporting less than $5,000 annual gross re- 
ceipts and that approximately 35$ of the total number of establishments 
enumerated in each industry, received less -chan $l,000o00 per establish- 
ment,, The secT/v fact revealed "ay this table is that in three of these 
trades - barber chop, cleaning- pressing^ etc 05 and shoe rebuilding, more 
than 50f of the total dollar volume of business went to establishments 
grossing less than $5,, 000; 00 per:year^ whereas the fourth group in this 
classification - beauty shops - reported 48,, 6t of the total dollar 
volume. . ..-.■ 

Table III, Distribution of total receipts and wages, plainly shows 
that both entrepreneurs and employed workers in these fields received 
in return for their services amounts far less than that specified by 
the United States Bureau of Labor Statistics as necessary to maintain 
a decent standard of living,, Among these groups the highest average 
annual net earnings per proprietor found in beauty shops, was $972(.00. 
The lowest, $572.00 is found in shoe rebuilders trade. The average annual 
wage for full time employees in this group did not fluctuate to the 
same extent as in the case of proprietors' not earnings, the highest 
average annual wage (beauty shops) being $834.00 as compared with the 
lowest - $730.00 (barber shop trade). The average annual net earnings 
per proprietor for all four industries was $679.28 as compared with 
an average annual wages for full time employees in all the industries, 
of $767.75. 

It is true, of course, that in two of the trades, barber shops and 
beauty establishments, the income of wage earners (and to a lesser extent 
proprietor-workers) is augmented by gratuities; but it may fairly be 
questioned if this method of increasing low earnings has proved satis- 
factory. Certainly, this system of obtaining revenue is not dependable 
as a source of income, especially during periods of economic distress. 



9835 



, _6~ 

Moreover, not all service trades or industries are affected by gratuities. 
For example, in the case of the four trades cited, two of them, shoe 
rebuilding, and cleaning and pressing, are not characterized by the 
giving of "tips". 

Table IV, "Increase in Establishments - 1929-1933" is signigicant 
because it attempts to portray the possible relation between e.cjnomic 
depression and the increase of small, owner-operated service, estab- 
lishments, where relatively little capital is required and machinery 
and equipment may be purchased on liberal installment terms. Obvious- 
ly, the picture indicated by this Table is not complete. The tabulation 
shows the number of establishments opened in 1930, 1931, 1932 and 1933 
as well as those which operated from 1929 through 1933; but there is no 
way of gauging the number' of establishments (undoubtedly considerable) 
which opened nnd failed within brief periods during this time. 

More than one- third of the establishments in operation in 1933 
were organized subsequent to 1929. Many of them are small and definite- 
ly in the owner- ope rat or category. While it is hazardous to draw con- 
clusions, the increase in so many establishments during the depression 
period suggests the entrance of nans' - persons drawn from other industries 
and trades, who were unable to earn a living and were attracted by the 
ease with which it was possible to establish themselves as entrepreneurs 
in the service industries. 

The statistical analysis presented by Tables I to IV inclusive 
carries with it several challenging questions. In view of the low earn- 
ings of the proprietors and workers, is there a limit to the number 
of small service units which it is economically desirable and socially 
wise for a community to have? When factual data shows the borderline 
has been reached, should the Federal Government or the states through 
agencies best suited for the purpose, restrict further entrance' to such 
fields on the basis of public interest, necessity and convenience? 
These questions were raised by Mr. Justice Brandeis in the Hew State 
lee Company vs. Liebmann case, (*) decided March 21, 1932. In a dissen- 
ting opinion in which he discussed the right of the State of Oklahoma 
to restrict the freedom of persons to engage in the ice business with- 
out having first secured a license, Justice Brandeis stated; 
"There are many proposals for stabilization. And 
some thoughtful men of wide business experience 
insist that all projects for 'stabilization and 
proration must prove futile unless, in some way, 
' the equivalent or the certificate of public con- 
venience and nocessity is made a prerequisite to 
embarking new capital in an industry in which the 
capacity already exceeds the production schedules." 

(*) New State Ice Company V. Liebmann, 285 U. S. 262. 



9835 



The questions raised are important and are vitally concerned with, 
the general problem of owner operator regulation. 

2. Commercial Trucking 

A statistical analysis of the owner-operator problem in the truck- 
ing industry might appropriately be prefaced by the following extremely 
pertinent extract from the letter of transmittal which accompanied 
the Trucking Code of Pair Competitions 

"In contrast with other .major forms of transportation, the truck- 
ing industry is typically a small unit, owner operated and flex- 
ible type of transportation activity. The natural operation of 
these factors has produced a disorganized condition within the 
industry, resulting in unstable competitive conditions» Not 
only has this situation tended to produce destructive com- 
petitive conditions within the industry, but the influences 
have extended substantially beyond the industry itself and 
have created particularly complex problems with relation to 
the coordination and regulation of various transportation agen- 
cies. To date, no complete and accurate data have been available 
to serve as a ba.sis for the solution of these complex problems." 

As in the case of other industries it is difficult to present 
a thoroughly complete and accurate statistical picture,, Enumerators 
fail to reach all owner-operators in this field, and there is a great 
deal of overlapping by reasons of registration of the same truck in 
more than one state. With notation of such limitations a number of 
sources of information are cited below as evidence on the nature and 
scope of the problem. 

While the several estimates vary as to the exact number of owner- 
Operator enterprises engaged in trucking c all point to the fact that 
the one-man enterprises consisting of individuals who own and operate 
a single vehicle constitute between 80 and 90$ of all commercial 
trucking establishments.. 

Thus, one estimate shows the following; 

(*) Total number of truck owners B „,,...., .2 S 168 ? 886 100$ — total 

Number of owners of one truck, ....... .1,896,886 87$ of " 

Number of owners of two or 

more trucks., 272,000 13$ of " 

Statistics gathered in the industry during HRA indicates that 83$ 
of members are one-truck operators and that the average ownership in the 
industry is 1.6 vehicle per member. (**) 

T*~) Source: 1928 edition of "AUTOMOBILE FACTS AED FIGURES" covers 
survey for 1927. 

(**) Eased on registrations under Code, - Trucking Code History. 



9835 



The American Trucking Association, Inc., estimates that operators of 
one .truck constitute 66.8 of all enterprises engaged in interstate opera- 
tions. This group owned 25.8^ of all vehicles registered in this field* 
The percentage for purely intrastate activities was estimated as still 

higher. 

Based on data obtained from an analysis of registrations under the 
Code, it appears that:(*) 

(a) Average number of trucks per registrant., .,1.61 

(b) Highest average in number of trucks per owner 2,68 (La.) 
(c)'; Lowest average in number of trucks per owner 1.11 (Me) 

The extent of owner-operator competition in this field is further 
illustrated by reference to Tables 5 and 6, (Appendix 3). These show 
the percentage of total trucks registered bjr "for hire" trucking enter- 
prises in a group of representative states, in the eastern and western 
parts of the United States by owner-operator enterprises, one truck per 
establishment. 

Table 5 points out that 85$ of all for hire trucking enterprises 
registered in the states of Minnesota, Missouri, Iowa, Nebraska and Kansas 
were one truck establishments, i.e. owner-drivers who possessed but one 
vehicle, (**) 

Table 6 indicates that 8")$ of the "for hire" trucking enterprises 
registered in the States of New York, New Jersey, Pennsylvania, Ohio 
and Michigan were in this classification, (***) 

An analysis made of registration data for Ohio, Indiana, Illinois, 
Michigan and Wisconsin indicates that out of 45,697 enterprises, 37,552 
or 82,8 reported having one employee, (****) 

With respect to trucking enterprises engaged in interstate opera- 
tions, an examination of tables compiled on the basis of Code registration 
shows that for the country as a whole the 7.6$ large enterprises, oper- 
ating 47.7$ of the vehicles, employed 55,6$ of the employees of the in- 
terstate enterprises, while the 92,4$ of the enterprises, with 52,3$ 

of the veh i cles employed but 44.45o of the workers, (*****) 

(*) This analysis was not based on total registrations but represented 

a substantial portion of registered vehicles 
(**) Source: Trucking Code History - Appendix 

(***) Source: Ibid, ■■ ■ •" 

(****) Source: Ibid, ©ne-truck enterprises conducted by one man con- 
sidered as establishments with one employee 
(*****) These figures take into account the one-truck owner who himself 
drives. In collection of the registration information, in 
most cases the owner-driver registered as an employee Truck- 
ing Code History. 



9835 



•-9~ 

These facts are cited to show that the competitive problem in 
the trucking industry is two- fold; first, the field has a tremendous 
number of individuals each owning one truck, who, on the oasis of in- 
tense competition, try to eke out a living as test they can; secondly, 
these entreprenuer-drivers are. engaged in direct competition with a 
small number of large 'firms which, however, employ a considerable 
portion of all. truck drivers in the industry,, 

Additional data to show the extent of owner-operator competition 
in tracking is presented by the Census of American Business, 1933- 
Services, Amusements and Hotels, (*) 

The information collected "by this survey,, which included cartage 
and trucking .establishments as b. business service enumerated 23,102 
establishments with 25,196 proprietors, 39,291 full-time employees and 
■ 20,478 part-time workers,, Cn the basis of the factual data reported 
it was found that for 1933 the establishments enumerated showed average 
net annual earnings per proprietor. .$1208, , average annual wages for 
full-time employees $1182 and average annual wages for part-time 
employees $523, The extent cf owner-operator activities in this field 
is further emphasized by the following facts. Out of the total number 
of 23,102 establishment, enumerated;, 10.-794 or 21 4$ reported gross re- 
ceipts of between $1000 arid $4,090 arid 6,757 or 54.2$ received less 
than $1,000 for the year, _ Trie low earnings of these owner-operators 
may be gauged by reference to the fact that out of a total volume of 
gross receipts amounting to $174,875,000, the 34«,2$ in the $1,000 to 
$4,999 group received only $24,322,000 or 7 2$ and their even less 
fortunate competitors in the category below $1,000 per annum received 
$3,767,000 or 4«,6$ There can be no doubt that in this lowest 
bracket at least the terms establishment and proprietor are synonomous. 
Thus, if this report may be accepted as typical the average annual 
gross receipts of about one-third of all proprietors in this field 
is the startlingly low amount of $575 9 This, when coupled with the 
fact that the survey showed an increase of 34„1$ in new enterprises 
between 1929 and 1933, .ould seem to support the contention of the 
American Trucking Associations, Inc > made in a letter previously 
cited but repeated because of its pertinence: (**) 



(*) Volume I 

(**) Letter, Ted, V. Rogers, President, American Trucking Associations, 
Inc„, Washington to Dr„ ID. Christopher Meyer, W e E.A«., October 
7,1933. U.R.A, Files—Trucking Code. 



9835 



-10- 



''There is a tremendous number of very small operators. This 
has "become increasingly true during this period of depression , 
when thousands of individuals, finding themselves out of em- 
ployment have invested some or all of their savings in a . 
motor truck with the idea of making a living "by hiring out 
their services in the carriage of goods. In general, their 
savings have "been enough only to make a small down paymentt on 
the truck. It is also true that many individuals who formerly 
were private carriers, including many farmers, finding their 
business drastically reduced, I have taken their trucks and gone 
into the "for hire" "business. Neither of these classes of new 
competition in the industry know anything at all about costs 
and in general proceed on the assumption that if they have a dol- 
lar or two left at the end of the day they are making something. 
This kind of competition from what is called the owner-operator 
has destroyed the stability of the industry and is one of the 
chief factors responsible for the present chaotic conditions. 
The ventures of these . individuals generally result in the loss 
of their investment in the truck, and no one really profits "by 
it." 

There can "be little doubt, therefore, whatever the argument for 
or against the owner-operator in this field, his presence and ac- 
tivities constitute one of the industry's major problems. 



9835 



-11- 

3. Retail Trade 

It is estimated that approximately 85$ of all the stores in the 
United States are composed of small independent establishments with five 
or fewer full-time employees including proprietors. (*) .Within this 
group are thousands of units varying in size from one-man organizations 
and enterprises conducted "by the proprietor and members of his family to 
establishments with one or two oiitside employees. Among these, the owner- 
operator problem is found. 

It is difficult in the retail field to present a clear- cut statistical 
distinction between the owner-operator units and small enterprises in- 
general. However, if it may be assumed that the avera.ge independent retail 
store with five or fewer enrolcyees in which the proprietor is actively 
engaged in the duties of a worker, is in the nature of an "owner-operator" 
enterprise, some information is available. These data show that the 85$ 
of enterprises which are composed of less than five employees exceed one 
and one-quarter million establishments and that approximately 95$ of all 
proprietors of independent retail stores are found in this group, which 
however, employs only abon.t 30$ of zhe full-time workers. The remaining 
15$ of retail establishments consist of independent stores with more than 
five employees as well as all chain stores. (**) 

■ Within the grout) comprising the 85$ are many thousands of one-man 
establishments, family enterpi-ices, and small units operated ~oy proprietors 
with one or two employees. 

The one-man establishments consist mostly of concessionaires, stalls, 
so-called ''hole in the wall 11 stores, news-stands and specialty stores. The 
family and small unit groups include general, shoe, paint, automobile 
accessories, grocery, delicatessen, meat and hardware stores, novelty and 
millinery shops, and others. 

The 1S30 Retail Census of Distribution covering approximately 1,543,000 
stores with a total sales volume amounting to over $49,000,000,000 has 
estimated that 43$ of these stores do an annual business of less than 
$10,000 and that the aggregate sales of these 43$ is 5.69$ of the total. To 
gauge the financial possibilities of the average owner-operator store the 
survey has divided all the stores into two major groups each covering 
approximately 770,000 estaoli aliments. In the first group - the category 
with which this report concerns itself, the maximum sales volume per 
year is estimated at $12,000 with a $5,500 average. The second group 
begins at $12,000 and includes the large enterprises which do a considerable 
volume of business. 

Apropos of the owner-operator problem, the Retail Census estimates 
that a store with a sales volume of $12,000 can provide a modest living 
for its proprietor providing the following three factors are present: 



(*) Retail Code Hi story. Based on special tabulation by Census 

Bureau. Table 7 

(**) Retail Code History. 

Based on special tabulation by Census Bureau. See Table 7 

9835 



-12- 

(l) the proprietor performs the duties of a worker in lieu of a paid 
employee; (2) the proprietor, in addition to the productive services 
rendered, imderstands his business and can select and sell merchandise with 
at larst average ability; (u) the proprietor possesses sufficient capital 
to cover average investment in merchandise, fixtures and accounts. 

This census further estimates that the gross margin on a $12,000 
volume of sales averages $3,000; thus the cost of merchandise which must 
be replaced e,s it is sold approximates $9,000. A further estimate assigns 
$1,250 to cover operating expenses including rent , insurance, taxes ,-repairs, up- 
keep of premises, light, heat-, power, communication, occasional advertising, 
etc. The margin remaining for payroll and profit to the owner-operator 
with an average gross sales volume of $12,000 is $1,750. This would be 
sufficient to provide a modest livelihood were it not for the fact that 
a store doing $12, 000 annual business requires two sales people-. If the 
owner-operator can utilize the services of members of his family, the 
$1,750 is available as compensation for his services and profits on his 
investment, but if he is unable to do this he must of necessity engage one 
full-time worker and a part-time worker. The owner-operator, under such 
circumstances, realizes only that part of $1,750 which remains after the 
wages are paid to his emplojrees. 

If any conclusion may be reached on the basis of these estimates it 
is that in many cases even an efficiently operated $12,000 store can 
provide but a limited wage for any of the persons connected with it, 
whether they are employees, members of the proprietor' s family or the 
owner-operator himself. Furthermore, the analysis presented above applies 
to establishments doing a volume of business amounting to $12,000. The 
census estimates that onljr a few within the 770,000 establishments grouped 
under this classification reached this figure; that the annual average sales 
volume in the stores of this group was $5,500 but that approximately 
419,000 out of the 770,000 establishments within the $12,000 group reported 
a sales volume of less than $5,000 with an average of less than $2,500. 

A considerable number of retail stores obviously fail to earn a 
proper livelihood for their proprietors and others connected with the 
establishments. The number of such stores is not as large, however, 
a.s woulo. be supposed by a cursory examination of the data as presented. 
Many types of stores within the low ea/rning range can survive indefinitely. 
Some of them are not necessarily losing enterprises. , Their ability to 
adjust themselves is due to a number of fa.ctors. Among such factors a,re 
ability to convert or process goods into other forms than that in which 
originally purchased; perform service functions in addition to the selling 
of goods; and in various ways hold down the cost of goods as low as 
possible. TJithin the lowest earning group of stores chances of survival 
a.re based on one or a combination of the factors listed above. It is among 
the small stores which do not engage in processing activities, or servic- 
ing functions, and where the volume of sales is so low as to be under the 
level required to remain in business that the mortality is the highest with- 
in the retail field. 

A factor of great importance which permits thousands of owner-operator 
enterprises to exist in the face of seeming inability to earn money, is 
the fact that they are not established for .the purposes of earning a full 
livelihood for their owners. Some are organized to provide supplementary 

9835 



-13- 

income to persons whose chief source of livelihood is derived from 
other fields. A number of these stores are opened to obtain for the 
proprei tor's family wholesale prices on supplies such as food and clothing, 
the proprietor himself being engaged in other activities. Many of them, 
particularly among the small general stores in rural communities, provide 
a medium for the sale of products of the farm, dairy, or small manufac- 
turing enterprises in which the proprietor is engaged. Some establish- 
ments augment the earnings received by their proprietors who are engaged 
in highly seasonal occupations. 

There is a strong argument for the existence of such enterprises 
inasmuch as frequently they provide the additional means whereby thous- 
ands of families can exist. Moreover, it is fairly certain that such 
establishments can never control any considerable portion of most lines 
of retail business, nor is it probable that the number and volume of busi- 
ness will grow to any appreciable extent beyond present proportions, 
because there will always be a limit to the number and financial abilit3' - 
of persons willing to undertake retail enterprises under such limited pros- 
pects. On the other hand, it is equalise true that to some extent the 
Collective competitive influence cf there establishments upon stores 
engaged entirely in the business of selling merchandise for the purpose 
of earning a livelihood for proprietor and workers is such as to provide at 
least some basis for an allegation of unfair competition. 

Viewed as a general preposition in its application to the entire 
retail field, the owner-operator problem is, however, undoubtedly impor- 
tant, (hit of a total of 5,700,993 persons engaged in retail trade during 
1933, 1,574,341 or 27.5;' were proprietors. ■(*) Further evidence of the 
importance of the problem is presented statistically in Tables 7 to 10 
inclusive (Appendix C.) 

Table. VII presents a comparative percentage analysis of independent 
stores which have five or fewer employees including proprietors with 
independent stores having more than 5 eirroloyees, as well as all chain 
stores. This Table shows that 84.4$ of all the stores surveyed belong in 
the category of those having 5 or fewer employees; that these establishments 
have 94.7$ of all proprietors but only 30=8$ of full-time employees. 

Table VIII shows the ratio of establishments within the first group 
listed in Table VII to the total' number of establishments in each respec- 
tive group, on the basis of percentages. This Table indicates that 21 diff- 
erent types of stores come under this classification, i.e., 5 or less 
employees per establishment (including proprietor). 

Table IX - "Major divisions in retail trade which average less than 5 
emploj^ees per establishment, l! presents a breakdown into 12 types of retail 
stores on the basis of sales volume, number of stores, full-time employees 
and average number of employees. Within these 12 divisions and groups the 
highest average of full-time employees is 4,9$ in the surgical instrument 
stores and the scale falls as low as 1.2$ in the general and dry goods 

(*) Census of American Business, 1933 - Retail Distribution, Volume I, 
Also Retail Code History. 



9835 



-14- 

stores division, which is apparently a one-man operator unit. 

Table X presents an estimate with regard to the number of retail 
establishments on the basis of dollar volume of business. This estimate 
was contained in. an exhibit submitted \>y A. D. Whiteside, Division Adminis- 
trator, in connection with a report forwarded to the Administrator of the 
MM - "Outstanding Impressions drawn from the general Retail and Retail 
Drug Hearings, September 14, 1933." and shows that out of 1,499, 620 
establishments a total of 574,621, or 38.3^ reported a dollar volume of 
less than $1,000 and that 429,121 or 28.6$ of the total number reported 
less than $500. 

4. Other Industries 

The remaining industries for which statistical data are presented 
to indicate to some extent the degree of owner- operator competition are: 
food manufacturing, graphic arts, manufacturing and construction* ■ 

For a number of reasons, chiefly the inability to secure appropriate 
material, it is impossible to present an elaborate or detailed survey in 
connection with these industries. The difficulties involved in obtaining 
satisfactory data are mentioned elsewhere in this Chapter. Pertinent data 
are decidedly limited in the construction, small manufacturing and commer- 
cial printing industries. 

Tables 11 to 18 inclusive (appendices E to H) afford the reader a 
somewhat cursory gauge of the extent of owner operator competition in the 
industries listed above. For each of these groups of industries and trades, 
with the exception of construction, two tables are incorporated; the first, 
entitled "Wages Earners, Salaried Officers and Employees in Establishments 
with Five or Fewer Employees (1933)" is based on data selected from the 
Census of Lianufactures, 1933 and the second, called "Establishments of Five 
or Fewer Employees by Wage Earners and Weekly Earnings - Selected States, " 
is based on a special census conducted in the States of Massachusetts, Ohio 
and Forth Carolina in the early days of the President's Reemployment 
Agreement. 

Tables 11 and 12 cover the food industries; 13 and 14 refer to graphic 
arts; 15 and 16 deal with manufacturing enterprises of the type in which 
owner-operator competition exists. 

Table 17 supplies data for the building construction in California basec 
on a special tabulation of trade association information. This table covers 
a distribution on the basis of 11RA. registrations and telephone listings. 
Table 18 presents PRA census data for building construction in three selectee 
states comparable to those cited in connection with the food manufacturing 
and graphic arts industries. 

e.. Food Industries . Among the food industries the owner-operator 
problem is especially significant in baking. The Census of Manufactures for 
1933 reports 14,483 bakers'- establishments. The national Bakers Council (*) 



(*) Former Code Authority. Estimate based on code authority mailing lists and 
covers only bakeries included under the Census of Manufactures' classificatic 
i.e. bread, cakes, pies, etc., as distinguished from establishments manufac- 
turing pretzels and crackers. 
9835 



' -15- 

estimated the number of bakery establishments in operation at about 
35,000. 

Thus, assuming that the lists of the national Bakers Council are 
accurate and complete and if comparable industries or trades may serve as 
a parallel for the assumption that in establishments with less than $5,000.00 
per annum gross income the proprietor is also a worker, approximately 20,000 
bakeries in 1333 were definitely in the owner operator category. 

Table #11 is based on special tabulations from Census of Manufactures 
for 1933. Out of a total of 36,506 establishments enumerated in the bever- 
ages (nonalcoholic) , confecionery, baking confectionery industries, 21,933 or 
almost 60$ are in the group which had five or fewer employees each. 

Table #12 which covers the beverages, bread and baker?/-, confectionery, 
floixr and grain and meat packing industries and is based on the PEA census 
cited above shows a distribution of e s tab li slim ents with five or fewer em- 
ployees by. wage earners and weekly earnings. In most of these industries the 
proportion of establishments with five or fewer employees is shown to be 
relatively high; for example,; in the beverages industry the establishments 
with five or fewer employees constitute approximately 51 percent of the 
total; in the confectionery industry the percentage is 31 and in flour and 
grain it is, about 54. The ore-oonderance of owner operator establishments 
in this field is further evidenced by reference to the baking industry which 
shows that about 22$ of all establishments enumerated are in the group of 
five or fewer employees, but that, this group has only 2.3 percent of the 
total number of enroloyees. The highest average number of wage earners per 
establishment is 4.3 (baking, Iforth Carolina) and the lowest 1.9 (confec- 
tionery, Ohio) . 

b, Graphic Arts, No definite data are available with reference 
to the extent of owner-operator establishments in the graphic a.rts indus- 
tries. It is ostinated -that between ten and fifteen thousand commercial 
printing establishments properly fall into this category. (*) Tables 13 
and 14 which emnioy the same sources of information as used in Tables 11 and 
12, present analogous data for the graphic arts industries. The divisions 
of the industry covered by Tables 15 arid 14 are: 1. commercial or job 
printing, 2. book publishing and printing and 3, newspapers and periodicals. 

c. Manufacturing Industries. C-eneral data similar to those 
shown for the good and graphic, arts industries are presented for a number 
of manufac tuning industries through Tables 15 and 16. Because of the 
diversity of these industries and the lack of more specific inf ormation, 

no attempt is here made to analyze the extent of owner-operator competition. 
The nature of the owner-operator problem in some of these manufacturing 
industries is discussed somewhat in detail, in connection with the testimony 
of indiistry and labor leaders at code hearings. (**) 
\ 



(*) Estimate based on verbal information secured from officials of the 

International Typographical Union, which is allegedly supported by data 
in the files of that Organization. 

(**) Chapter II - 1JPA Program of Control. 



-16- 

Tables 15 and 16 present only f ragman tory data. The former, "based oh 
Census of Manufactures data covers the jewelry, fur, toys and embroideries, 
schiffili industries and the latter, based on the P3A census presents infor- 
mation for the mens 1 s clothing, women' s clothing, soap, boots and shoes 
(other than rubber), leather, electrical machinery, motor vehicle bodies 
and parts and foundry and machine shops industries. 

d. Construction. The owner-operator is a problem of relatively 
large proportions in the construction industry, particularly in the special- 
ty contracting industries. Ho relia.ble data are available with respect to 
the number of persons engaged in the construction industry. Exceedingly 
limited information is supplied by the Census of Construction, 1930, but 
this source does not undertake any breakdown to show the number of bona-fide 
employees, self-employed journeymen and so called "curbstone contractors." 
Estimates, vary with regard to the total number of wage earners (including 
one-man operators) in the industry. The number probably falls between 
3,000,000 and 3,800,000. 

It is impossible to guage precisely the number of one-man contractors 
and their counterpart in the journeyman classification - the self-enroloyed 
journeymen. There is no doubt, however, that the total represents a 
significant proportion. 

Some fragmentary data, are cited from various sources. 

Tile Setting . Information obtained from' the Tile and Mantle Contractors 
Association of America, Inc., (*) is probably indicative of the extent of 
owner-operator competition in this field. An estimate based oh a partial 
.survey conducted by this organization shows that out of a total of 2,700 
tile contractors 1,100 or 40.7$ were one-man operators. These 1,100 
operators, however, secured approximately 24 percent of the total volume of 
orders for work during the period covered by the survey. 

Fainting and Faoerhanging . Ho breakdown is available with reference 
to the number of owner-rope rators in this industry. The very nature 'of the 
painting and paperhanging industry supports the assumption that the percent- 
age of owner-operators of the total number of painting and' paperhanging es- 
tablishments is exceedingly high. The former code authority estimated 
approximately 70,000 "members of the industry" in 1933, and about 300,000 
'"workers. " There is no doubt that a, substantial number of the former were 
"one-man contractors" and that a large percentage of the latter group 
constituted "self-employed journeymen", that is journeymen workers who 
between jobs in the employ of contractors on a wage basis, contracted, for' 
the performance of work on a job basis. 

Tra.de Association Data On Distribution Of Specialty 
Contracting Industries In California 

Table #17, is based on a special tabulation of trade association 
information covering a distribution of nine principal specialty contracting 



(*) Trade association with headquarters in Washington, D. C. 
9835 



-17- 

industries in California counteis of 60,000 and over population. These 
industries, all divisions of the "basic LPA Construction Code (l"o. 244 
Volume 5 Aoproved Codes) are: Electrical Contracting, Seating and Piping, 
Mason Contractors, Painting and Decorating, Plastering and Lathing, 
Plumbing Contracting, P.oofirg and Sheet Metal, Tile Contracting and TTood 
Ploering. The daca furnished in this table are included in a report sub- 
mitted to the KM by CL F. Ashley, Acting Administration Member for the 
Construction Industry and the Pacific Coast Regional Supervisor under date 
of August 20, 1935. The salient feature of this table, the relationship 
between the character of the industries, registrations and telephone list- 
ings, is discussed in the summers'" comment by. Mr. Ashley incorporated as a 
suoplement to the Table. 

._ PPA Cen sus .fo r -Selected States. Table #18 presents PPA data on the build- 
ing Construction Industiy for the States of Massachusetts, Ohio and ITorth 
Carolina. An exceedingly rough and limited analysis is presented here with 
regard to the general distribution of establishments and wage earners in 
the building Construction Industry. This table indicates that the per- 
centage of establishments with five or fewer emploj^ees was: Massachusetts, 
67; Ohio, 72; and- Horth .Carolina, ...62. 



9835 



-18- 



B PROBLEMS OF CONTROL 

In what res'oects and from what standpoints is the owner-operator a 
problem? One of the major complaints against the owner operator is that 
he too frequently fails to maintain desirable or necessary standards 
of workmanship, quality of product, or sanitary conditions and thus 
endangers or undermines the public health, safety and standards of service. 

It is further charged that his methods of doing business too fre- 
quently so undermines competitive standards as to destroy public interest 
or confidence in a commodity or service and thus reduce the total volume 
of business and income that a given industry or trade might otherwise 
command, 

.Another complaint is that his presence in any considerable number in 
an industry tends to create and maintain such low standards of competition 
as to render impossible a decent livelihood to the owner operator him- 
self, and maintains socially undesirable and unnecessarily long hours of 
work. In short, competitive pressure tends in many industries and trades 
to maintain owner operators in a depressed or "seated" condition. 

Competition of owner-operators is assumed also to make difficult and 
sometimes impossible the maintenance of socially desirable labor standards, 
and public service by the larger units in the industry or trade which 
give employment to the bulk of the workers. 

In summary, control is sought to protect and better serve the public, 
to raise labor standards and to promote a more effective and profitable 
use of economic resources. 

The problem of control derives in part from difficulties of precise 
measurement in the different lines of industry and trade, and the de- 
termination of practicable standards or objectives of control. A farther 
problem is the development of methods of control that are practicable 
administration. 

A still more difficult problem derives, however, from the conflict 
between a theory of formal control and the philosophy of individualism. 
A few generations ago American industry was typically small scale, and a 
major portion was of the owner operator type,. America was developed on 
the basis of individual initiative and enterprise. It has been tradi- 
tionally assumed that hard work, thrift and business acumen would enable 
an individual to start business in a small way and gradually attain a 
state of independent competence if not wealth, power and the control of 
a large enterprise. Significant vestiges of this traditional viewpoint 
persist, and conflict with demands for public regulation of individual 
enterprise of the owner operator type. 

In individual cases, and to different degrees in different lines of 
industr^r and tra.de, present owner operators are beginners in the 
traditional historical sense outlined above. That is, an xxnpredictable 
number of these operators will become operators of independent competence 
in the fixture. In some lines of endeavor possibilities of advancement 



-19- 



are still open. In many other lines, however, it would appear that the 
typical owner operator is doomed, to a "sweated" existence. Adaptation 
cf a orogram of control to the variable possibilities for personal ad- 
vancement is another element of difficulty. 

As previously noted, although the KIPA provided for a sweeping 
program of industrial concrol, special clauses were introduced to pro- 
tect the small enterpriser; to conserve as fully as possible the virtues 
of indicidual enterprise. On the other hand, the attempt to develop and 
stabilize higher labor and competitive standards through worker organiza- 
tions and trade associations assumes the necessity or desirability of 
bringing about a practical adjustment between the traditional individual 
interest and a collective or group interest. 

COWNEE GPEEATOE REGULATTLH F.RICE TO KHA= 

Prior to LIRA the owner-operator was subjected to a considerable 
measure of regulation through state laws and municipal ordinances, and by 
trade associations and trade -anions-., 

With respect to state legislation and municipal ordinances regula- 
tion was not directed against owner operators as such, but was incidental 
to the exercise of police pcw°r regulation in general. The only occasion 
for pointing out such regulations with particular reference to the owner 
operators is that the imposition of labor standards, commodity and service 
standards, requirement of financial responsibility, licensing and in- 
spection, use of labels, and promotion of public health and safety tended 
to curtail activities of those enterprises which could maintain them- 
selves only on the basis of relatively low competitive standards - low 
labor standards, unsanitary conditions and methods, unsafe methods of 
operation, substandard quality of service s and failure to meet full 
financial responsibility for worker or public loss occasioned by. their 
methods and conditions of operation. 

The use of the police power to prescribe reasonable regulations 
needed to protect public. health, raorals and safety, and to maintain 
public peace, order and the general welfare provided the legal basis 
for a wide range of laws and ordinances that directly affected com- 
petitive standards and practices* As incidental to police power 
objectives, regulations in numerous cases prescribed such matters as, 
the number of hours per day and days per week workers might be employed, 
the character of buildings or other appurtenances and equipment, physical 
fitness and technical qualifications cf workers, financial responsibility, 
standards and grades or labeling of merchandise. In some cases, for 
example laws requiring a state license for horse shoers, the police 
power was used for the direct nurpose of controlling labor supply. 

Although regulation of owner operators through police power has 
for the most part been only incidental to a public welfare objective, 
the total amount of such regulation prior to TffiA was by no means 
inconsequential. Moreover, it is susceptible of considerable expan- 
sion. In general, courts have been quite liberal in interpretations of 
what constitutes a reasonable use of police power. (*) It is worthy of 

(*) For a thorough discussion of this subject the reader is referred to 
the case of Francis Barbier, V. Patrick Connelly (113 - U.S.. 27) 
Appendix H. 

9835 



-20- 



note, in passing, that during the NBA period numerous trade associations! 
seriously" turned to local ordinances to holster up ineffective ERA regu- 
lation. 

Both lahor unions and trade associations have applied themselves to 
the task of raising the plane of competition of owner or>era>;ors with 
variable degree of success,, In general, these attempts at regulation 
have "been essentially voluntary and cooperative in character. 

The "basic efforts of association and unions were not directed to- 
ward the elimination of owner-operators, Many examples can he cited to 
indicate that those agencies instead of seeking the owner-operator's 
elimination actually sought to make available to him the channels and 
benefits of organization. Thus, the barber shop trade presents the 
interesting phenomenon of a current dispute between the Journeymen 
Barbers International Union (the workers organization) and the Associated 
Master Barbers of America (the employers' trade association) concerning 
the proper organization for membership of the one-chair shop proprietors. 
The union contends the operator of such establishment is a self-employed 
journeymen and therefore should belong to the union, wherea.s the Associated 
Master Barbers of America classified him as an individual entrepreneur- 
proprietor. 

The International Brotherhood of Teamsters, Chauffeurs and Stable- 
men of America (a labor organization) has attempted to cope with the 
problem of thousands. of individual truck and taxicab owners by organiz- 
ing and accenting them as full members. These entrepreneurs in return 
for the benefits obtained through membership, are required to comply 
with the Unions' standards and working conditions especially with regard 
to maximum operating hours. 

Other trade unions which have adhered to this oolicy for a number 
of years are the Journeyman Tailors Union of America, the International 
Brotherhood of Bookbinders, the Cigarmakers International Union, United 
Wall paper crafts, International Metal Engravers, Friendly Society of 
Engravers, Retail Cleaners, Dyers and Processers Union, Hotel and 
Restaurant Employees International Alliance and Bartenders International 
League of America and Amalgamated Butchers, Workmen and Meat Cutters of 
America. It is to be expected that problems have manifested themselves 
in connection with the attempted enrollment of owner-operators in union 
ranks. Difficulty has been experienced in enforcing compliance with 
union conditions and standards. Occasionally, a basic clash has arisen 
between owner-operators as a group and workers employed by large con- 
cerns on the whole, however, unions have found with regard to establish- 
ment of union policy that the benefits in stability accruing to the 
industry, . its members and workers in consequence of the inclusion of 
these working on own account far outweigh the difficulties involved. 

Trade associations, likewise, in the past have attacked the problem 
of the owner-operator through organization and education. The basic 
purpose in attempting to achieve organization of owner- ope rat or was 
to facilitate the regulation of hours, price stabilization and improve- 
ment of fair trade practices. Membership in a trade association implied 
at least tacit acquiescence on the part of the owner-operator to the 
regulation of policies and ethical standards proposed on behalf of the 
trade. In the fields of retail trade, trucking, construction and com- 
mercial printing among others, definite- organization of owner-operator 

9835 



-31- 



enterprises has proceeded for a number of years. This is especially 
true with regard. to the small- efficient enterprises. As in the case 
of the labor unions mentioned above, organization has followed on the 
theory that it is better for the industry as a whole to include the 
owner-operator within the framework of the voluntary organisation and 
secure his cooperation than.' to minimize the effects of individualistic 
competitive activities by permitting him to remain on the outside. 

Efficient owner-operator, enterprises have aligned themselves with 
trade associations and labor organizations in order to participate in the 
benefits of voluntary organization. It has been established that small 
as well as large units may profit from the existence of media capable 
of gathering statistical information, simplifying" and standardizing 
methods of production and distribution, eliminating waste, accelerating 
credit and collection activities, encouraging commercial and industrial 
research, making easier the joint negotiation of purchases, making 
possible the disseminaticn of valuable information, and, when proven 
necessary, supervising the regulation of output and operating hours. 

The picture presented abcce with regard to the extension of coopera- 
tive organizing activities by brade associations and trade unions into 
the realm of the owner-operator is obviously not found in all cases. 
There are many cases where trade associations have shown undisguised 
hostility to owner- operator establishments -'and' have carried on antagonistic 
activities. Paradoxically, .these activities sometimes assume a contra- 
dictory aspect; i'.Jei they aim to force the owner-operator into trade 
associations or they concern themselves with his elimination from the 
field of competition.. In the former instance the obvious procedure is 
to attempt to persua.de reluctant owner-operators to join and abide by 
the rules and regulati qns . of the . association; and, if unsuccessful to 
adopt more effective methods such as terrorlzation and intimidation. (*) 
the second method of '''stabilisation" of an industry, predicted upon the 
elimination of owner-Operator s s involves such factors as boycotts, con- 
certed pressure through restriction of credit facilities and temporary 
lowering of prices even below those charged by the owner-operators whose 
elimination is sought. Tactic?' of this sort result in internecine war- 
fare among members of the trade and the smallest establishments usually 
lose„ 

In cases where owner^cperator organization in trade groups has been 
carried out most constructively, the trades or industries have been able 
to establish and maintain higher labor and competitive standards, raise 
the level of efficiency and bring a degree of stability into the in- 
dustry. Similar results, have been accomplished through collective bar- 
gaining between labor organizations and employers. 

Stability achieved through either of these methods of organization 
and control inevitably results in a degree of restriction. Whether or 
nor such restriction is in the public interest depends uoon a delicate 



(*) It may be questioned to what extent reputable trade associations 
will indulge in such practices, but that it has been done is sup- 
ported by the history of the cleaning and dyeing industry, laundry 
trade, motion : "picture theatre industry and others. 



-22- 



and difficult "balance to "be- drawn "between stability with restriction on 
the one hand and a degree of competitive chaos on the other. 

The "building trades provide numerous illustrations of attempts to 
control the owner operator "by specific rules embodied in collective 
agreements,. In a number of these thades such as plumbing and steam- 
fitting, where the problem of the one-manoperator affects the legitimate 
contractors through the operations of the so-called "curbstone contractors" 
and the unions through the contracting efforts of the "self-eirroloyed 
journeymen, 11 specific rules and regulations, enforced so far as possible, 
attemot to prevent the increase in numbers of such persons as well as to 
restrict their activities,, In these trades, journeymen are discouraged 
from engaging in contracting activities, even though of a temporary 
nature,, Journeymen are likewise restrained from entering the services 
of the "curbstone" contractors, An illustration of these restrictions 
is found in + he following extract taken from a working agreement, typical 
of many others: 

"Section 8: 

Plumbers and- st^am f itters t;h all '"ork for none but 
legitimate li ce nsed master pl umbers and steam- 
fitters with an establishe d p lace of busines s 
and those approved of by the joinb arbitration 
board herein provided for, and shall do no work 
for themselves ; outside of their own property, 
and shall endeavor to have all work go through 
the legitimate channels of business,, (*) 

Journeymen are prohibited from establishing themselves as legitimate con- 
tractors without first receiving honorable withdrawal cardt, from their 
local unions. Through this method, the unions are able to maintain a 
check upon the number of journeymen who enter the ranks of contractors. 

In the painting and paperhanging trade, where unemployment among 
journeymen frequently assumes significant proportions and where the line 
of demarcation between master and journeyman is not as strict as in the 
plumbing trade, the owner-operator problem is covered by agreements such 
as the one quoted herewith: 

"Section 5: 

Journeyme n Painters, Paper h and eis , Decorators, etc., 
shall only be allowe d to contract during strikes, 
Lockouts and unemployment. A Journeyman painter, 
etc., shall not be allowed to contract any job 
without talcing out a permit for each job from the 
business agent. " (**) 



(*) Agreement between Plumbers and Steamf itters Local No. 335 and the 

Erie (Pa.) Sanitary Assn. Kay, 1925: Source - TRADE AGREEMENTS, 1925 
Bureau of Labor Statistics - Pages 53 and 54. 

(**) Extract from agreement, Painters Lccal Ho, 49 
9835 



The trade associations in the building industry, on' their part, are 
constantly engaged in checking the activities of curbstone contractors 
with the view of enforcing state- registration laws and 'municipal building 
codes, as well as seeking the employment of comoetent, qualified journey- 
men wherever possible. 

Still another illustration of the i joint efforts of organized labor 
and business to solve the 1 owner-operator problem by voluntary agreement 
may be found in connection with the retail enterprises. In this field 
one of the most' perplexing manifestations of the owner-operator problem, 
as previously indicated, is the "employment'' of members of the pro- 
prietor's family under such conditions a.s to defeat the efforts of organ- 
ized labor to establish definite minimum standards'- and conditions of 
employment. Frequently such irrlivi duals are classified as "managers" 
or partners. The following extract of an agreement represents an effort 
to meet this ofo :f ;14m: 

"Section 18; 

In stores where theie ha? been a family affair 
of help or extra help there shall be but one em~ 
' ployed as manager of the different departments who 
shall not be eligible to membership;" all the rest 
of the parties involved, in such a store shall become 
members of Local No.- ' 213; " (*) ..... 

The obvious purpose in a clause of this type is to designate dona 
fide emoloyeed (regardless of their relationship to the proprietor) as 
such and therefore parties to the working conditions and standards 
specified in the agreement. 

Other examples of trade agreements having as their fundamental 
purpose the regulation of owner-operators and their competing activities 
are cited below: 

"Retail market owners and partnerships not employing 
help shall join the. union either as active or honorary 
members. " (**) 

"If' a boss goes into partnership, the na,me of the new 
partner is to be recorded in th hall of records. The 
checks and bills mast carry thf names of both partners 
and the names of partners must also ap'oear on the win- 
dow of the business. The uni n will not recognize such 
partnerships that were entered into" 'during the time of 
strike. The union does not recognize a partnership of 



(*) Agreement of Local 219, Belleville, 111., Retail Clerks Int. 
Protective Association. 

(**) Extract from agreement of Locals Kos. 489, 631 and 254, 

Amalgamated Meat Cutters and Butchers Workmen of N.A. , Westchester 
Co., F. Y. , November, 1927 - Page 101 - Trade Agreements - 1927 - 
B. of L. S, , Dept. of Labor. 

9835 



-24- 



three . (*) .- 

"If the boss himself works in the bakery he must give 
two days work every week to oar union men." (**) 

"The employer agrees not to employ any of his family, 
neither his wife, his son, nor any other relatives, 
unless he is a member of Local 209." (***) 

"Neither shall any journeymen, who is a member of the 
party of the second part, be permitted to take piece 
or lump work in any shape or manner, or work for any 
owner or contractor who does piece or lump work, whether 
he be a member of the party of the first part or not. 

Contracting firms having two or more members, only 
two of them shall use tools. "(****) 

"No member of Local 43 shall work for any but legitimate 
shept metal contractors who have signed this agreement, 
are regularly engaged in business, who carry compensa- 
tion for their employees, and who have a permanent place 
of business and the customary equipment." (*****) 

"If there is more than one partner or stockholder in 
the firm, they shall give the name of the partner or 
stockholder whom they wish to perform the work above 
designated to the union, who (sic) shall decide whether 
the man in question shall be permitted to perform this 
work." (******) 

The excerpts cited, while different in language and scope, have a 



(*) Agreement - Hebrew Butcher Workers' Union No, 234 - New York 
City, , 

(**) Agreement - Hebrew Bakers Union No. 30 Hartford, Conn. 
(***) , Agreement - Hebrew Bakers Union No, 209, Baltimore. 

(****) Agreement of Local No. 183, United Brotherhood of Carpenters 

and Joiners of America, Peoria, 111. , 

Source: Trade Agreements, 1923 and 1924. B. of L. S. , U. S« 

Department of Labor. 
(*****) Agreement, Local No, 43 and 12, Sheet Metal Workers International 

Association and sheet L'etal Contractors' Association -, 

( - 
# 

Jigreement ~ 

(******) {Local No. 44, Upholsterers International Union of North America - 



9835 



-25- 



comrncn fundamental ourpose, namely; to control the competitive activities 
of owner operators in the various trades ar.d industries. This material 
proves that the problem was of sufficient importance to have engaged the 
attention of organized laser and industry for many years prior to m^ 



9835 



-26— 

CHAPTER II. 

THE IT. R. A. PROGRAM OP CONTROL. 

A. CONTROL OP WORKING HOURS AMD WAGES OP OWNER OPERATORS AS A MEANS Op 
ATTAINING NIRA OBJECTIVES. 

The attention of the National Recovery Administration was focused 
upon the owner operator problem in a number of industries because the 
attainment of the major objectives - reemployment, increase of purchasing 
power and elimination of unfair trade practices was interwoven with the 
control of the working hours and in some cases the wages of owner^operators. 
It was "believed that the reemployment objective would be realized largely 
through the reduction of the employees working hours and the stimulus to 
business coming from a larger wage bill. However, any program designed to 
increase employment was compelled to cope with thousands of self employed 
indivisuals as well as small employers working side by side in direct 
competition with wage workers. Many such, persons worked unreasonably long 
hours and obtained an income of leas than code mini;num wages. It was agreed 
by many that some restratint should be placed upon the working or operat- 
ing hours of these proprietor-workers to prevent an unhealthly competitive 
situation, capable of nullifying the efforts of the National Industrial 
Recovery Act in many trades and industries. 

The preceding chapter described the efforts made prior to NRA by 
organized workers and employers to control that group of owner operators 
who had contributed to the perpetuation of long hours, low wages, in- 
sanitary conditions of employment and low levels of competition. Despite 
these efforts, control of this element had never been achieved on a 
thorough or satisfactory basis. The National Industril Recovery Act with 
its legal sanctioning of the doctrine of cooperation in industry furnish- 
ed opportunity and impetus to further efforts in this direction. Trade 
unions and representative business and industry groups realized the 
possibilities of constructive control made possible by the NIRA and it 
was through these sources that the issue of control was presented to the 
Recovery Administration. 

The control provisions with which this study concerns itself (*) 
are chiefly those which in one way or another were designed to limit the 
number of hours which owner operators were permitted to devote to manual, 
mechanical and other types of productive occupations and services. A 
few codes contained provisions governing wages of owner-operators and 
members of their families. 

Labor's traditional policies demanded that the codes entirely res- 
train employers from engaging in manual, and processing occupations in 
direct competition with their employees. However, in approaching the 
problem labor representatives were necessarily required to pursue a 

(*) For detailed list of control provisions the reader is referred to 
listings with tabulated hours and wage provisions; (Appendix I) 



9835 



-27- 

somewhat flexible policy inasmuch as the need for reconciling this ob- 
jective with certain practical and legal considerations was at once 
realised. Consequently, many codes instread of completely prohibiting 
employers from engaging in processing or mechanical operations merely 
restricted them to the maximum number of hours prescribed for workers 
in the industries and/or limited the number of employers in each estab- 
lishment permitted to exceed the maximum rumber of hours in the perform- 
ance of such functions. , . 

Various industries confronted with the owner operator problem hoped 
that by limiting the number of employers permitted to engaged in mechanical 
functions and prescribing definite maximum number of hours for those 
allowed to perform productive services it would be possible to attain 
increased employment, greater purchasing power and instire protection of 
code minimum standards. Employers were of course primarily interested 
in protecting competive standards but were equally desirous with labor 
to secure appropriate clauses to prevent fraud and subterfuge designed 
to hinder the attainment of the objectives listed above. More specific- 
ally, management (*) was especially interested to secure control clauses 
to promote fair competition through elimination of destructive price 
cutting based on unreasonably low labor costs. Labor, on the other hand, 
had special objectives, namely, the preservation of union wage levels 
and conditions as well as the attainment of a potentially large member- 
ship which it vras believed would result from the increased opportunities 
for organization ani collective bargaining made possible through the 
general strengthening of the labor market. 

B . INITIAL AT TEMPT S AT CO NTROL UED ER TEMPORARY CODES . 

The first attempts made "oir the National Recovery Administration to 
cope with the owner operator problem were in connection with substitu- 
tions granted specific industries in lieu of the provisions of the Presi- 
dent's Reemployment Agreement. These substitute provisions usually were 
those contained in the drafts of the codes as submitted for approval. 
Industry .groups in requesting owner operator provisions in the substitu- 
tions made it clear that they expected the proprietor-workers in their 
industries to comply with recognised minimum labor standards as a prere- 
quisite to obtaining the 31ue Eagle. Moreover, these initial requests 
for owner-operator control provisions afforded industry and business 
leaders desirous of cooperating with the XLA an opportunity to guage the 
attitude of the Recovery Administration on the subject of owner-operator 
regulation. 

Only a few substitutions contained provisions which referred to 
owner operators. These were chiefly in the printing trades, ^ae com- 
plet list of industries which requested owner-operator control provisions 

(*) Term used to describe the large percentage of business and industry 
which employed most of the workers and where employers usually re- 
frained from engaging in mechanical or processing occupations. 



9835 



-28-. .. 

through the medium of FI1A. substitutions was as follows: "barber and beauty 
shop, lithographic, Metropolitan New York housewreclcing, Non-Metropolitan 
publishing and printing, printing, umbrella. A tabulation of the pro- 
visions with respect to language and date of approval follows: 

(1) Barber and Beauty Shop Industry 
(August 10, 1933.) 

"The maximum hours fixed shall not apply to persons 
engaged in the managerial or executive capacities, 
but shall apply to owners or operators of a barber 
or beauty shop actively working at barbering or active- 
ly engaged in beauty work." 

(2) Lithographic Industry 
(August 15, 1933.) 

"For all employees in the industry performing 
mechanical operations, including any proprietors, 
supervisors, foremen or other executives doing such 
work, the maximum work week shall be forty hours and 
the maximum work day shall be eight days." 

(3) Metropolitan New York Housewrecking Industry 
(September 20, 1933.) 

"No person shall be engaged in housewre eking for 
more than 35 hours per week, nor more than seven hours 
in any one day." 

(4) Non-Metropolitan Publishing and Frinting Industry 
(August 28, 1933.) 

"Publisher-printers and printers shall not employ 
any factory or mechanical worker or artisan, including 
any proprietors, members of their families *** for 
more than 40 hours per week in mechanical work, averaged 
over 4 weeks' period, provided, however, that they shall 
not be employed more than 48 hours in any one week." 

(5) Umbrella Industry 
(August 12, 1933.) 

"No factory or mechanical worker or artisan may 
work more than the maximum 40 hours per week, nor more 
than eight hours per day, even though such worker may 
be an owner, officer or director of an owner corpora- 
tion, who perfoms direct labor in the actual manufac- 
ture of products of the industry." 

(6) Printing Industry 
(August 2, 1933.) 

"Standard working hours shall be 40 hours per week 
for all mechanical employees, including any proprietors 
9835 



-29- 

*** when doing mechanical work." 

(7) L nun dry Industry 
(August 21, 1933.) 

"The term productive labor as used herein is 
defined to include any employees and any owners or 
managers, or members- of families connected with or 
employed by any laundry establishment and actually 
engaged in working on or handling articles left for 
washing and/or ironing." 

Little information is available concerning specific events leading 
up to the adoption of the owner-operator clasues in the substitute pro- 
Visions, -he sources which sponsored these control clauses are,, however, 
known. The Associated Master Barbers of America proposed the Barber and 
Beauty Shop clause; the Laundry Owners' National Association presented the 
clause for the laundry trade; the ilational Association of Lithographers 
sponsored the provision for the Lithographic Industry; the National 
Editorial Association proposed the. clause for the IJon-Metropolitan Pub- 
lishing and Printing Industry and the United Typothatae of America was 
responsible for the provision affecting the printing industry. 

In considering the clauses adopted for the various branches of the 
graphic arts industries, it is pertinent to note that the printing trades 
unions were opposed to the. control devices as proposed by the trade 
associations and unsuccessfully attempted to secure amendments. The 
printing trades unions insisted that the level of competition between 
owner-operator printing shops and establishments giving employment to 
labor could best be raised and the stabilization of labor conditions 
facilitated through adoption of control clauses designed to establish 
opening and closing hours limiting shop . operations to the maximum number 
of working hours allowed for mechanical workers other than owner-operators. 
The various branches -of the -printing industry were finally codified under 
one master Graphic Arts Industries Code, ('No*. 287, Volume 7) with a number 
of industry divisions. In the approved Code the limitation of 40 hours 
per week was applied, to owner operators in the commercial printing branches, 
(with the exception of the lithographic industry) , for the time actually 
engaged in mechanical occupations. In the lithographic division the 
control clause limited all persons engaged, to any degree in mechanical 
operations to the maximum work day or work week. 



9835 



-30- 



C. REGULATION THROUGH PROVISIONS IN CODES OE FAIR COiffETITION 



Among the divisions of industry, business and trade which were 
codified approximately 105 included in tfteir respective codes clauses 
designed to limit the opportunities of owner operators to engage in 
practices alleged by Labor and Industry groups as detrimental to the 
progress of the recovery program. These clauses were proposed by a 
numoer of different groups and frequently were subjected to considerable 
modification lorior to adoption. In industries '-here labor and employers 
were organized to a high degree prior to the Recovery Act, as in the case 
oi the garment, fur and building construction trades the control pro- 
visions were submitted usually as tne result of joint deliberation, al- 
though in such instances it sometimes happened that while employers and 
workers agreed as to the necessity of control devices, they differed in their 
conceptions of the language or scope of the proposed provisions. (*) 

'The NRA Labor Advisorv Board and staff played important roles in 
the negotiations for control 'rovisions. The influence of the Board was 
especially potent in industries where workers were poorly organized for 
in such cases it devolved upon representatives of the Board to scrutinize 
owner operator control provisions submitted by trade associations and de- 
cide whether the language and scope of the proposed clauses were in the 
best interests of workers. 

Occasionally, prominent trade union officials acting as representatives 
of the Labor Advisory Board, proposed control clauses. An example of this 
may be found in the plastering industry code hearing where Michael J. 
Calloran, President of the Operative Plasterers International Association 

(*) An excellent illustration is offered in the case of the Pleating, 

Stitching and Bonnaz Embroidery Industry. *iere, notwithstanding the 
existence of collective bargaining relations between employers and 
employees in the ineustrv and the common conviction that control of 
employers' working hours (operation of machines) was essential, 
dispute prevailed at the NRA. Code hearings for this industrv as to 
the scope of the proposed clause. The union va shed to eliminate all 
emplovers from operation of macnines wherea.s the most important 
group of organized employers proposed that in each establishment 
having more than one employer all but one be eliminated and that 
this one's hours for personal machine operations be limited to those 
of the workers in the industry. The employers stressed their plan 
as a means of reconciling divergent viewpoints ajnong extreme elements 
but the union replied that it i r '0uld be difficult to -oolice the activi- 
ties ox any employer permitted to engage in productive functions and 
that the limitations proposed by the employers '-oulc not prevent sub- 
terfuge nor provide for the maximum reemployment possibilities, 

Volume 1. Transcript of hearing, Fleating, Stitcning and Bonna? Era- 
broidery Industry, Pages 68-164. (Code No. 276, Volume b) 



9835 



- 31 - 

of the United States and Canada proposed that employers who personally 
performed manual work or were engaged in mechanical operations "be reg- 
ulated "by the same maximum hours that were provided in the code for the 
plastering industry to regulate employees. 

D. SPECIFIC PROBLEMS OF CONTROL 

• Specific instances of some of the owner-operator problems discuss- 
ed in Chapter I were cited to WPA "by labor organization representatives 
and industry groups to support requests for control provisions to reg- 
ulate owner-operators. Reference to these alleged difficulties helps 
to explain the scope of the proposed clauses as well as the reasons for 
their, adoption. 

Some of the problems cited were localized in particular industries; 
others crossed industry border lines and were reported equally trouble- 
some in various fields of enterprise. 

The major difficulties for which control clauses were requested may 
be classified as follows: 

1. The fluctuating contractor- journeyman 

2. Multiplicity of working partners in small enterprises. 

3. Subterfuge through (a) cooperative enterprise corpora- 
tions 'and (b) family corporations. 

4. Effect of working proprietors upon peak aa d slack periods* 

5. Need for special regulations for starting and finishing- 
periods of work. 

6. Wages and other compensation for owner operators and/or 
members of their families, 

1 . The Fluct u ating Co n tractor J our neyman . 

The problem of distinguishing contractors from journeymen was, 
as the title in'icates, chiefly a concern of the building and construc- 
tion industry. Branches of this industry in which both workers and 
employers were highly organized had endeavored prior to HRA to establish 
rules and regulations through collective bargaining agreements for the 
purpose of clarifying the status of persons connected with the industry. (* ) 
However, because of the inherent nature of the industry, the determination 
of status or separation of functions of individuals associated with the 
industry has never been satisfactorily achieved. In some Tirancb.es of 
the. industry it was impossible to circumscribe the jurisdictional area 
of occasional employers, self-employed journeymen and regular workers. 
Consequently, when the MA was enacted, organized employers, and workers 



(*) Chapter 1 
9835 



-32- 



agreed to follow what seemed to "be the only'course possible under the- 
circumstances and -propose devised designee to -limit the number of maximum 
hours of al 1 "employers who personalis perform manual work or are engaged in 
mechanical operations" to the same maximum number of hours provided in the 
codes to regulate the employees. 

The problem of regulating the hours of the fluctuating contractor" 
journeyman was succintly explained to tn< I RA by a representative of one 
of the construction industry branches (*) in support of a proposal 
for a control provision. He made the following statement: 

"In section 5 we have tried to deal "ith a most trying situation, 
that of the man who is jumping back and forth from the ranks of 
the journeyman to the ranks of the contractor, as best suits his 
convenience. He is an unfair competitor both to the journeyman 
and to the contractor because he seldom, if ever, figures his 
costs correctly or observes tht customary .ours of labor, or 
changes those for whom he taker- contracts sufficient to r>av him- 
self the goint- rate in the territory in which he is operating. 
This section is introduced with the hone that through this means 
this man can be made into a better competitor for either the 
journeyman or the contractor." 

Among the prominent branches of the construction industry where the 
fluctuating contractor proved especially troublesome were the painting, 
'caperhanging ^nc tilesetting trades. On the other hand, industries such 
as plumbing and electrical contracting, which were highly regulated 
through state and municipal licensing laws, were not as greatly troubled 
with this particular problem . 

2 . Multiplicity of Working-Partners, in Small Enterprises 

The existence of many shops, stores and factories with, a large 
number of co-proprietors was another important contributing factor in the 
demand for control provisions. This problem which especially affected 
the garment and fur industries in metropolitan areas, included in its 
ramifications the related problems of sub-letting of premises, sub-con- 
tracting and homework. This phase of the inquiry, however, concerns ■ 
itself primarily with the relationship between establishments- witn a - - - - 
multiplicity of partners and the need ior oo'de ••control provisions. In- 
many small shops arid factories in the metropolitan garment ^nd fur centers 
the personnel consisted bf" three, four, five or more partners and a— like 
number of employed workers. The degree to Which -these partners followed 
manual and processing occupations such as operating embroidery machines 
varied with seasonal demands and fluctuations within the particular in- 
dustries, luring oeak'neriods when the demand for workers increased the 
partnership problem was not considered as serious- a-s during slack periods. 

(*) Statement of L. .illiams, 'representative ox the Heating, Piping 
and Air Conditioning Contractors' National Association, at 
hearing on proposed cod.e of that industry, September 11, 1953. 
Transcript of i tearing, Construction Industry, Volume 9, pp. 56-57. 

9835 



-33- 



Many partners under, faborable business conditions, devoted more time to 
the management and sales ends of the undertaking and less to operating 
machines. However, when business suffered either as the result of 
seasonal and style factors or generally depressed, conditions, the tendency 
for proprietor-partners to dis.cnar :e 'orkers and operate the machines 
^themselves was very pronounced, (*) This situation had existed for many 
years prior to NBA. 

In the early days of NBA the trade unions in the garment and allied 
industries approached the partnership problem with the hope of obtaining 
clauses to eliminate, all orners and proprietors from manual operations. 
This approach was oased on the traditional labor theory that a complete 
distinction should be .made o.etveen proprietors and other bona-fide members 
of the industry on the one hand, irrespective of the numoer in each es- 
tablishment, anc the workers emplo r ed by tnem on the other. 

3ecau.se of the high degree of union organization in many of these industries 
it was possible to obtain strong support t.s such proposals, It is 
particularly significant that the in -er shops where this type of partner- 
ship problem die not manifest, itself and where owners were interested in 
preventing destructive price: cutting, based on unreasonably low labor costs, 
supported the unions' propos.-ls, whereas, some of the medium-sized and most 
of the smaller establishments (which abounded in great numbers) where 
proprietors believed they would be directly affected by the adoption of 
such proposals, vigorously objected to them, and freouently challenged 
their legality. The result "'as a series of compromise clauses which in 
affect either limited the hours of all o^ner-partner s in each establish- 
ment wnile engaged in productive functions to the maximum number of hours 
prescribed for the workers under the o-rticular codes and/or limited all 
members of a partnership out cne to such hours. 

Important examples of industries where these' devices were d.ebated 
at code hearings were canvas :;ooe.s industry ( Code No, 333 - Volume 8), 
Schiffili and Hand machine Embroidery Incustry (Coae No. £56 - Volume 6), 
Pleating, Stitching anc Bonnaz anc Hand .Embroidery (Code No. 276 - Volume 6), 
Art Needlework Association (Code 33.5 - Volume 8) and Fur manufacturing 
(Code No. 436 - Volume 10). 

Canvas Goods Industry and wholesale Canvas Goods Mfg. Industry. 

The industry proposed that ".with the exception of one individual per 
member of tne industry, all members of any individual proprietorship, 
par tner ship (**) if engaged in any process of direct manufacture of the 
products of the industr.y, shall be bound by the above schedules of hours 
of work and pay, regardless of such proprietory interest. " 

Tne industry spo desman, Eicnard H. Poster, Chairman of the Board of the 

National Tent and Awning manufacturing Association and Chairman of the 

Code Committee, in his testimony submitted the following reason pn<5 data 
in support of the proposal: 



(*) For examples of particular industries see testimony cited Chap. II. 

(**) Article V, Section 5, Code for Canvas Goods Industry. 

9835 



~34~ 



11 As previously stated, the "urepu of Census figures 
for 1929 show that there are 1,002 establishments. 
Our estimates are in accord, but there are a large number of 
individual family establishments that are engaged in 
this industry in their homes, etc. Section5 of Article 
V -provides that with the exception of one individual 
per member of the Incustrv, all members of any individual pro- 
prietorship, partnership* * * * although connected with 
such member as co-owner, partner * * * *, if engaged in 
any process of direct manufacture oi the products of the indus- 
try, shall ot bound by the above schedules of hours of work 
and pay, legardless of such proprietary interest. This 
provision, we submit, is essential to effectuate 
the policies of the National Hecovery Administration 
in spreading employment and is also desirable from 
the viewpoint of the consumer in that many' of tne 
products of the Industry are manuf acturec under con- 
ditions which are unsanitary and without inspection 
supervision of the proper government' 1 agencies. " (*) 

Apropos tne proposal to exempt one member of the industry 
or partnership from the hours limitation provision, Israel Convisser 
a representative of the Greater Few York Awning men ' s Association, a 
subsidiary of thr- National Association, stated: 

"With respect to Article V, Section b oi the code proposer 
by the National Tent Makers Association, we except 
to paragraph 5 as it appears, and propose in its 
place the following: 

"all members of any indivicua l 
proprietorship, partnership *** 
although connected with such membe' as 
co-owner, -partner** if engaged in any 
process of direct manufacturing of the 
products of the industry shall be bound by the 
above schedules of hours of work and 
pay, regardless of such proprietory in- 
terest. " 

It will be noted that this provision differs from 
the one proposed by the National Association in the 
one respect that "'e would have it include all members 
of any firm, without excepting any individual . 
i'»e feel particularly in our experience there are 'any 
number of individual employers who are unlimited as to 
hours of labor, putting in as . ruch as 16 iiours of work 
a day when necessary, who do not charge themselves 
with the work thr t they do, who feel that their labor 
is gratis, and they are tnereiore able to undersell tneir 

more legitimate competitor. un tne same point we suggest 

(*) Transcript of Hearing, Onvas Goods Industry and Wholesale Canvas 
Goods manufacturing Industry, Volume 1, Fage 34, Nov, 2L , 1933.. 

9835 



-35- 



that the cost of any work dene, either in the -process 
of direct manufacturing or in selling, "hether performed 
by any of the herein pocve mentioned members, or by pnyone 
elce, pm. whetner or rot actually paid for, shall be 
included in the commit- tion of the cost of production. 

' e i eel tnat if the employer is bound to b^se his 
cost of production u^on whatever lr oor is done, whether 
the wages -re actually paid or ~ot, the reft of the 
industry will be in Detter position to meet the 
competition offered." 

The Upholsterers, Carpet and Linoleum r.Iechanics International 
Union of Forth America, on behalf of the workers, favored the elimin- 
ation of all industry members as productive workers. This viewpoint 
was advanced, bv Louis l.'aldman, on oenalf of the labor organization 
stated: 

"\"e also wholeheartedly support Section 5 of 
Article V * * * And we feel that perhaps the 
elimination of even one individual in such 
a small unit of production as ^eing 
exempt from the hours r -:id wrges may oe p very 
wholesome way of maintaining r -nd developing 
standards in this industry.^" 

Art Needlework Associat ion 

At tie code hearing for the art needlework industry, this problem 
also arose. In re^iy to a ...uestion -oropounded by the legal advisor as to the 
necessity for a control clause the union representative, Mr. Weiss, 
stated: 

"***I am not thinking of aoars so much from the 
standpoint of oniVir competiton, to the members 
of the industry, but I am thinking of it from 
the standroint of unfair competition so far as 
labor is concerned. 1'ou t^l.'.e a s mall corn-cany 
which m?y be O'mnecl in whole or in p->rt by three 
pej-^le, fll of three o f whom -re skilled, o-oer^- 
tors, r ll tnree o i W' Cm c - n perl^rm must- of th e 
functions perf or m ed in --- s aall pl r nj-, , Vow, if 
there is no restriction on tneir hours, they 
can work 50, 60, 70, fad hours a week, and cpn 
turn oat all t e work that is required oy the 
business in h-nd, '"ithout employing the help 
which tney would be compelled to employ ii 
their number ot working hours were restricted. 
In other ' or&s, tney operate as emplo ~ees more 
than in r managerial capacity. If tney were 
compelled, in so far as their factory operations 
are concerned., to work 40 hours a week, to work 



9835 



-36- 



fccording; to p.n hourly schedule, they would be com- 
pelled to put oin one or two, 01 three or f our em- 
ployees. " (*) 



(*) Transcript of Herring, Art Needlework Association. Volume 1, - pge 76, 
9835 



-37- 

Fur Manufacturing Industry 

The fur manufacturing industry offers still another illustration and 
gives further evidence of the fact that the problem was of common concern 
to management and labor. Mr. N. Rompapa, on behalf of the United Fur 
Manufacturers' Association, in support of a proposal to apply the maximum 
number of hours prescribed for the industry for all employers and all 
members of the industry insofar as they themselves performed the work of 
craftsmen, testified as follows: 

"As there is a possibility of unfair competition to fur 
manufacturers, and especially to fur plate makers, to the 
effect that memb ers of the industry may co me together unde r 
the guise of -partnership s and perfor m the work o f c raftsm en 
themselves without the employment of l abor and thus be exempt 
from this Section 8 of Article III, since they will not be 
employers, said Section 3 of Article III should be modified 
so as to include all employers and members of the industry. "(*) 

It is pertinent to note that in this industry, 'as in the case of 
some others, disagreement prevailed between the union and management re- 
presentatives as to the scope of the proposed control provision. Whereas 
the employers' group wished to limit only the hours of members as the 
industry and in this manner control owner-operators functioning as partners, 
the International Fur Workers Union proposed th at in t he case of firms c o n- 
sisting of m or e than one par t ner, only on e shOL ild be per mitte d to work. 

The examples cited as well as the general trend of testimony submit- 
ted in connection with other industries indicate that , in attempting to 
apply owner operator maximum hour control devices to partnerships, three 
primal purposes existed: (l) to prevent destructive price-cutting based 
on unfair', low labor costs; (2) to discourage the development of ficti- 
tious family partnership relations formed to evade code provisions; (3) to 
provide reemployment in establishments operating on a legitimate partner- 
ship ba,sis. ....... 

3-a Subterfuge through cooperative job enterprises 

Closely allied to the partnership problem and perhaps of more serious 
consequence to the workers affected was the problem of owner-operator 
cooperative formed for the purpose of defeating the Recover;* - Act. The 
added seriousness arose because this practice more directly touched workers 
than the ordinary fraudulent partnership schemes, inasmuch as workers 
frequentl3 r were made unwilling parties to the so-called cooperative job 
plans. 

The cooperative shop or job projects followed different courses and 
employed various methods, dependent upon the nature and type of the parti- 
cular industries. In the construction field the usual practice followed 
the form of issuing worthless shares of so-called stock to bona-fide 
mechanics, thereby classifying' them as part owners in the enterprise and, 
in the absence of code control provisions, immunizing them from all labor 
standards and requirements. This situation was explained by Mr. Harry C. 

(*) Transcript of Hearing, Fur. Mfg. Industry, Volume , 1 ,. page 81 
3835 



-38- 

Bates, -a vice president of the Bricklayers, Masons and Plasterers Union of 
America, at the hearing for the Code for the Terrazo and Mosaic Industry 
(Code No. 244 Volume #131. His testimony included the following statement: 

"As a representative of the Bricklayers, Masons and Plasterers 
International Union, in which the terrazo workers have mem- 
bership, I might say that the statement ina.de "by, Mr. Furman as 
to the need of stamping out co-operative jobs in the industry 
is well known. He covered that to an extent. that is satisfac- 
tory to us. At this time and previously there have been certain 
so-called contractors who would have eight or ten mechanics in 
their shops and those mechanics would own one or two shares of 
so-called stock in the shop and all of these contractors would 
work at the shop, both as a machine operator and as a contractor, 
making i- absolutely impossible for the bona-fide contractors to 
compete with a job of that kind. They would go 'out and estimate 
a job and pay wages far below that enjoyed in the industry and 
after the job was completed and in a very short time these 
same men who were promised bonuses woiild be freezing out many 
bona-fide contractors, . by control of the majority of the stock 
which would remain under their trade name, and operate with 
another group of workmen, and secure an additional contract. 

This clause, of course, would stamp out that practice, which 
would be of interest to all parties concerned in the industry. 
It is in the interest of workmanship to prevent chiseling 
contractors from going out at this time to secure contracts 
in this way to work terazzo workers and helpers at a wage 
scale far below that enjoyed by those organizations connected 
with the industry. (*) 

An additional instance of the cooperative plan designed to nullify 
the purposes of the Recovery Act in this particular sphere was cited ~dj 
Mr. Norman L. Marks who testified at the Code hearing for the Salvage 
and Wrecking Industry. (Codes of Pair Competition as approved U. S. Govern- 
ment Printing Office, Volume VII, page 459) This industry proposed that 
"any employer who performs the work of an employee shall be deemed an em- 
ployee, " and in support of this proposal, the proponent's representative 
stated: 

"In that connection may I add that the purpose of the clause 
is because of the fact that throughout the country we have 
found that in a great many wrecking and salvage jobs, in .a 
great ma^y of the yards, in order to defeat this, the purpose 
of the A c t, there has been cooperative bidding; a n d cooperativ e 
work . In other words, a man who is an employer takes in ten 
or twelve of his employees for a particular job as partners-, 
and then claims that they are all employers of labor, and , 
bound neither by the maximum hours, nor minimum wage. We 
intend to prohibit the so-called cooperative work for the 
purpose of defeating the Act, We propose that clause as a 
means of defeating it. (**) 



(*) Transcript of Hearing, Terrazo and Mosaic Industry (Branch of Con- 
struction, Vol. 1, Pages 38,39, The Mr, Puhrman referred to was a 
spokesman of the Industry, 
0335 (**) Transcript of Hearing, Salvage and Wrecking Industry, Vol. 1, Page 85. 



-39-, 

The garment .industries likewise were .troubled with the owner-operator 
cooperative shop problem. At the hearing on the Code for the Pleating, 
Stitching and Bonnaz Industry acrimonious dispute prevailed in connection 
with proposed clauses to limit the hours of working employers and to elim- 
inate the practice of subletting portions of garment lofts together with 
machines to workers on a fictitious partnership or cooperative basis. 
Both clauses were definitely interwoven and the testimony with reference 
thereto; both pro and con, dealt with the basic conditions in the industry. 
The union representatives were not opposed to legitimate sub-letting of 
premises to bona fide manufacturers in cases where manufacturers operat- 
ing on a small basis, found it. difficult to maintain entire lofts, but 
proposed the restrictive measure as a means of preventing the development 
of fraudulent cooperative enterprises. The following extract from the 
testimony of Mr. Silverman, a member of the industry, in support of the 
proposed control clauses portrays the nature of the difficulty experienced 
by portions of the industry as well as labor to cope with the borderline 
enterprises against which the clauses were proposed: 

"Br. Freidman (an owner-operator group representative M.R. ) 
wants absolute freedom for all bosses to work, no matter 
whether there are three or four; and he does not want the 
clau.se that only one shall be permitted to work. So far as 
subletting in the shop is concerned, this is a different and 
greater evil than that which would permit the boss to work 
at the machine. They conceived the idea that there are four, 
or five crafts in a shop, and there are tuckers and stitchers, 
pleaters and embroiderers. (And there are really more than 
five.) • And one man would conceive an idea: Instead of em- 
ploying workers they would assign one part of the work to a 
man and say, 'you are the boss over this ,: , and to a man on 
the hemstitcher end he woiild say: 'you are the boss of hem- 
stitching, ' and to the embroiderer, 'you are the boss of the 
embroideries. ' Ke claimed they were partners or individual 
manufacturers. And, if necessary, they would render indivi- 
dual bills. ****They would depend upon their own labor, and 
they would put in as many bosses and as many hours as possible. 
A shop of 18 machines could have five different bosses or five 
different employes." (*) 

Baring the hearing on the Code for the Fur Bressing and Far Dyeing 
Industry (Code of Fair Competition as approved, U. S. Government Printing 
Office, Vol. IV, Page 161,) the cooperative shop problem caused consider- 
able discussion. The attempt to frame appropriate phraseology resulted 
in a maze of confusing language and the development of a considerable 
difference of opinion as to legality and scope of the contemplated clauses. 
The International Fur Workers Union's representative, Mr. Markewich, 
stated at the end of a prolonged discussion during which various types of 
cooperative shops in the industry and their effects upon labor standards 
and .employment conditions were analyzed: 



(*) Transcript of Hearing, Pleating, Stitching and Bonnaz Embroidery 
Industry, Volume 1. Page 97 , 

9835 



-40- .. 

"If you take as a 'model the Cloak Code and the Fur Manufact- 
urers' Code and try to work in the same language into this 
Code "by saying that those who are interested in a coopera- 
tive factory or a cooperation should work the same hours as 
all other workers in the industry, and if you are going to 
do what they did in the other codes, establishing, as you 
■ say, Mr. Adviser, a reasonable minimum wage scale in addi- 
tion to it, you are going to remove any possible incentive 
for them to organize shops and work as they have been doing, : 
because the only way they can operate those shops is under a 
sweat-shop basis working long hours and dividing whatever 
little pay there is. That is the only way that that can be 
done, I think, legally and practically. " (*) 

Another representative of the Union, Mr. Schlessinger, pointed out 
the direct connection between the cooperative shop and the reemployment 
objective. He referred to the fact that this particular industry had 
about 3,000 unemployed, and that although 2,000 of these might be reemployed 
as a result of the Code, the remaining 1,000 not finding work might be 
forced to operate as cooperative enterprises and would be in a position to 
underbid the labor market. 

3~b Subterfuge Ihrough Family Corporations 

The use' of corporatr devices to defeat NBA was emphasized by labor 
spokesmen' at a number of industry code hearings such as Baking, Schiffle 
and Hand Machine Embroider:/, Far Dressing and Retail Trade. Here the 
problem consisted of the "employment" of stockholders in corporations, 
most of which were family affairs. The need for limiting hours in many 
small establishments which utilized the services of members of the family 
arose from the fact that most of these enterprises were small and their 
competitive status was closely related with the number of hours which they 
operated and the number of hours which workers were employed. Under such 
circumstances extraordinarily strong pressure existed for opportunities 
to use the services of persons without restriction as to hours. This was 
attempted by the simple device of incorporating the business and issuing 
shares of stock to the members of the family or others associated with the 
establishments who then, in the absence of code control provisions, would 
be eligible to work unlimited hours. 

Labor organizations in a number of the industries affected attempted 
to cope with this problem by securing clauses in or amendments to the codes 
to govern the employment of stockholders and relatives. 

A typical reference to this problem may be found in the statement of 
a leading labor representative who urged added protection to the workers 
in the bakery industry. Charles F. Holnann, representing the Bakery and 
Confectioner-/ Workers International Union of America, testifying on behalf 
of a proposed amendment to guard workers against the stockholders problem, 
testified as follows: 



(*) Transcript of Hearing Fur Dressing and Fur Dyeing Industrv, Code 
Ho. 161, Transcript Vol. Ho. 1, p. 155. 



9835 



-41- 

"Zefore we pass from the subject of the work week we should 
like to speak for a moment of one or two other matters hav- 
ing relation to it because they have relation to employment. 
We have proposed amendments to a section having to do with 
the employment of stockholders and relatives. Unless our 
amendment is accepted it will be possible for many shops to 
employ stockholders and relatives to the extent of one-fifth 
of their working force or to a majority of their inside force 
in the case of a small shop and thus to exempt them from the 
provisions of the code as to hours and wages. We urge that 
no such blow be struck at reemployment and new purchasing 
power. " (*) 

Despite the technical differences involved in the formation of ficti- 
tious partnerships, owner-operator cooperatives and family corporations, 
and notwithstanding the various methods employed by these devices, their 
common purpose, as described "by the proponents of control devices was the 
attempt through open subterfuge or legal technicalities to avoid compli- 
ance with, labor provisions and in some instances fair trade practices of 
the codes. Although the code control provisions adopted to guard against 
these types of subterfuge varied in phraseology, in effect they all provided 
that members of industry, or owners, partners, officers or stockholders who 
worked as productive employees should be subject to the hour provisions of 
the code. A number of codes qualified the control provisions by exempting 
one partner, stockholder, etc., from the effects of the provisions. These 
qualifications resulted, as previously pointed out, from the necessity of 
compromising conflicting views and in order to eliminate unjue hardship 
to some bona-fide partnerships, small corporations, where the exigencies 
of the situation demanded that a more flexible policy be adopted. 

4. Effect of Working Proprietors Upon Peak and Slack Period 

Although the nominal purpose of many owner operator hours control pro- 
visions was the prevention of fraud and subterfuge, their primary object 
was to expedite reemployment through curtailment of hours. In the trades 
and industries where proprietors competed with employees for the available 
work, it was deemed necessary to create conditions favorable for the absor- 
ption of the maximum number of unemployed. To accomplish this and at the 
same time to avoid undue hardship to employers in small units was a problem 
faced by labor and business leaders. The trade union viewpoint on the sub- 
ject of employers competing with workers for available work has been pre- 
viously indicated. It consisted of the conviction that the responsibili- 
ties and functions of the employer differed from those of workers and that 
the former should not, when conditions favored it, deprive the latter of 
employment anymore than that workers should usurp the entrepreneural rights 
of employers by engaging in marginal one-man or cooperative enterprises. 

It has been previously pointed out that this doctrine or policy on a 
number of occasions resulted in a demand that employers and members of the 
industries generally defined as proprietors or owners refrain from engaging 
in mechanical or processing occupations. This demand was emphasized in the 
garment trades which periodically faced the problem of seasonal unemploy- 
ment due to peak periods. It was a matter of general knowledge, at least 

(*) Transcript of Hearing, Baking Industry, Jan. 30, 1934, Vol. 1, p. 177. 
9835 



-42- 

to those concerned with efforts to regularize and stabilize employment 
in the garment industries that during peak periods workers operated under 
considerable physical stress, with unlimited overtime a common practice. 
As these periods ended, hundreds of workers were immediately discharged 
and their places at the machines occupied "by proprietor members of the 
industry. Trade union leaders expressed the hope that the NIBA through 
code control provisions would drastically limit the number of owners 
and employers who worked at machines and thereby contribute to the elimina- 
tion of peak period evils. 

This problem was raised at a number of Code hearings. For example, 
at the hearing on the Code for the Pleating, Stitching and Bonnaz Embroi- 
dery Industry trade union representatives pointed out that in the City of 
New York alone approximately 600 shops had from one to seven employers 
each. On an average, during peak periods, two employers in each shop 
constantly operated machines. Union leaders submitted data to support 
requests for rigid cdntrol devices. These data showed that in this one 
area 1,200 owner-operators with unlimited working hours prevented, an 
appreciable number of workers from obtaining positions. They also pointed 
to the practical difficulties involved in attempting to police the activi- 
ties of employers permitted to work at machines during prescribed periods 
and asserted as a conclusion that the only way by which NBA control of 
owner-operators would materially contribute to reemployment was' through 
complete elimination of employers and owners from productive functions. 



9835 



-43- 

5. Need for special regulations for starring and finishing 
periods of work. 

A number of industries, in addtion to facing the problem of securing 
code definitions of owner-operators and incorporating nnximum hours clauses 
to regulate the productive services of such persons, were confronted with 
the special problem of limiting shop hours by providing definite starting 
and finishing hotirs re ; gulation for all workers engaged in mechanical or 
processing activities. • '• • 

These additional regulations were deemed necessary because the pre- 
ponderance of owner-operators in proportion to the number of vage earners 
in some industries resulted in the fear that the ordinary maximum hours 
control provisions would 'not be sufficient to prevent owner-operators from 
working unlimited hours. Another reason was the belief that the adoption 
of special clauses'to apply either on a national scale or through flexible 
sectional or local determination would prove necessary to govern procedure 
relative to opening and closing hours per day or shutdown periods per week. 
Here, as in cases previously discussed, there existed a definite relation- 
ship between the projection of control clauses and the anticipated stabil- 
ization of hours in the interest of fair cimpetition, wage stabilization 
and reemployment. 

The industries which requested the special limitation of hours clauses 
were found chiefly among the service, apparel, textile and manufacturing 
fields. (*) 

Representative examples may be cited in the following Codes of Pair 
Competition as approved, U. S. Government Printing Office, volumes and 
pages as shown: 

Millinery 

Dental laboratory 

Laundry Trade 

Barber Shop 

Merchant & Custom Tailoring 

Textile Print Roller Engraving 

Schiffli and Hand Machine Embroiedry 

A number of specific problems contributed to the proposal of the 
special clauses and these will be briefly discussed. 

1 . Hours I dentical with' Employee Maxim um Hours 

In some industries it was necessary to establish opening and closing 
hours of shops and establishments identical with employee maximum hours. 
This was due to the existence of union agreements with employers which 
restricted the hours of work to definite periods as between 9:00 and".' 
5:00 and/or to five days per week, and the fear that unless such labor 
provisions were incorporated into the codes, a minority of cooperative 
shops or partnership establishments would be able to exercise unfair 
advantage. .'Another reason was that labor, in industries which prior to 



umc 


3 No. 4 


Pi 


age 


- 1 


it 


11 5 




ii 


283 


it 


» 6 




it 


487 


it 


" 9 




u 


331 


ii 


ii 14 






47 


ii 


n 7 




ii 


539 


ii 


» 6 




1! 


133 



(*) Per complete list of industries with special control clauses see 
listing of hours provisions (Appendix I) 

9835 



-44- 

.NPA had not obtained agreements with honors provisions of this type, 
hoped that hy stabilization of honors through NPA control machinery the 
"basis for permanent collective agreements would he laid. A typically 
standard clause designed to provide definite starting and finishing 
hours of work for all persons connected with the mechanical and pro- 
cessing activities of the industry is found in that proposed on "behalf 
of the pleating, stitiching and bonnaz hand embroidery industry (codes 
of fair competition as approved, W. S. Government Printing Office, 
Volume 6, Page 409, Art. 3): 

"Section 1: A normal workday shall not exceed seven hours; 
the hours of work shall he 8:45 A. M. to 4:45 p. M. with 
one hour for lunch. Section 3: No employee shall he permitted 
to work more than five days in any seven day period, commencing 
on Monday of each week and ending on Priday. Section 5: Any 
employer iteho does the work of an employee shall he subject to 
the provisions of this Code as to hours of labor." 

It will be noted that this clause incorporated three distinct principles 
of limitation; (l) the daily hours limitation, (-2) the five-day week 
and (o) the restriction of working employers to the hours per day and 
days per week assigned to employees generally. Through the integration 
of these three sections an effective regulatory provision was obtained 
and processing hours synchronized with employees maximum hours. A 
clause of this type vra.s possible of administration only in cases where 
strong organized labor pressure manifested itself. 

In some industries proposals to incorporate the principle of starting 
and finishing regulations were coupled with desire to avoid the rigidity 
evident in the type of clause quoted above. These industries proposed 
clauses which contained definite starting and finishing hours, generally 
based on union: agreements , but which permitted modifications necessary 
on the basis of local conditions and needs. The special opening and 
closing hours clause adopted by the schiffilie and hand embroidery 
industry (codes of fair competition as approved, U. S. Government 
Printing Office, Volume 6, Page 142, Article 4, Section -1-a) is typical 
of this group: ■ 

"A normal work day shall not exceed eight hours; the hours 
of work shall be. from 8:a.rn. to 12 o'clock noon, and from 
1:00 P. M. to 5:00 P. M. from Monday to Friday inclusive, 
except that the Code Author i t y subject to the approval of 
the Administrator may, up o n proper showing, allow sectional 
members of the industries to operate at other hours than the 
daily standard hours herein provided." 

Another step in the direction of flexibility was evidenced by the 
proposal of clauses giving the code authorities power to designate opening 
and closing hours determined by local conditions. This is illustrated 
by the clause adopted in the ladies handbag industry, (codes of fair 
competition as approved, U. S. Government Printing Office No. 332, Volume 
No. 8, Pago 30, Article 3); Section 4: 

"Subject to the approval of the Administrator, the Code Authority 



-45- 

shall designate the hours before which work shall not begin and 
the hours after which work shall not continue. In the discretion 
of the Code Authority such opening and closing hours need not be 
uniform throughout the country hut may he varied to meet varying 
needs and conditions." 

C losing Special D ay Problem 

A number of industries wished to secure control provisions to 
cover the closing of establishments during certain days of the week. 
The most frequent manifestation of this problem occured in connection 
with attempt? to translate into code control provisions the principle 
of the five-day work week. In most cases trade unions were responsible 
for the presentation of clauses to safeguard or effectuate this prin- 
ciple. The language most frequently employed to define this objective 
read as follows! 

"No employee shall be -nermitted to work more than five days 
in any seven day period commencing on Monday of each week and 
ending on Friday. " 

Among the industries for which clauses of this type were proposed were: 

Schiffili & Hand Machine Embroidery (Code No, 256 Volume Ho. 6 - P. 133 

Pleating, Stitching & Bonnaz (Code No'. 276 Volume Ho. 6 - P. 403 

(*) Cap & Cloth Hat (Code NO. 457 Volume No. 11 - P. 193 

(*) Celluloid Button, Buckle & 

Novelty Mfg. (Code No. 400 Volume No. 9 - P 367 

(Codes governing these industries found in U. S. Government Printing Office 
Publications, volumes and pages as indicated) 

it. 

(*) Permitted work to be performed .on Saturday of week in which a legal or 
religious holiday occurred during normal work week. 

The Saturday closing provisions showed the same range of flexibility 
that characterized the daily opening andclosing hours provisions referred 
to above. In some industries provision was made for a straight five day 
week whereas in others (cap and cloth hat) code authorities were given 
power to effect the necessary variations based on local requirements. 

A different sort of special closing day problem was presented by 
the dental laboratory industry where a control provision was submitted 
requiring all laboratories to close Saturday afternoon and Sunday. 
The complete control provision read as follows: 

"No dental laboratory shall be operated or remain open in excess 
of fifty-two hours in any one week; nor shall any such laboratory 
be operated or open for the purpose of performing any business 
function on Sunday or before 7 A. M. on any week day, or later than 

9835 



-46- 



1:30 P. M. on Saturday. Uniform holiday closing hours "between 
the hotirs heroin prescribed may "be established in any metropolitan 
area,, city, or town, "by ,. majority vote of all labratories located 
within such areas and when approved by the Code Authority shall be 
binding upon all laboratories in such area." 

Representatives of this industry testified at the Code hearing that 
many owner-operator laboratories were inflicting intolerable standards of 
competition on the stabilized elements of the industry through long hours, 
Sunday work and price cutting. The adoption of the above clause was 
vehemently protested by owner-operators who finally received a concession 
in being permitted to engage in productive duties four hours in excess 
of the standard forty hour week established for workers: in the industry. 

The laundry industry presented still another variation of the 
special closing day problem. The control provision adopted, in addition 
to prohibiting opening of laundries for production of service between 
the hours of 10 F. M. and 6 A. M. and receiving and delivery work bet?reen 
the hours of 8 ; . m. and 5 a, m. , applied the limitation in both instances 
to Sunday. Here, the purpose, as explained by representatives of the 
industry was to strike at the competition of Chinese family hand laundries 
which. operated during all hours of the night and Sunday. The testimony 
of Mr. A. Cronenbergj representing the Brooklyn Hand Laundrymen Association, 
is in point. He stated; 

"The Chinese runs his store, usually opening about six o'clock in 
the morning and operating until about one a. m. , the following 
morning, and employing no outside labor in his store. If there are 
any variations of hand laundries, whether they a, re two or three 
Chinamen working they always report that they are partners, and, 
therefore, do not have to pay each other any salaries or wages. 
That competition, that Chinese competition in the matter of hours, 
is something that I believe the Administrator should take into 
consideration." (*) 

In evaluating the worth and scope of these special clauses to govern 
opening and closing hours or to designate special clolsing days it is 
well to remember that in practically all cases such clauses were definitely 
■coupled with provisions which limited the hours of owner operators while 
engaged in mechanical or processing activities. Consequently, even thoiigh 
the special clauses relating to starting and finishing of work applied to 
all workers governed by the particular codes, any special significance 
which attaches to these clauses is the result of their relationship to 
the operating hours of proprietor-workers, and the consequent application 
of enforcement efforts raid methods in this field, 

6. Wages and Other Compensation for Owner Operators and Members of 
their Families. 

(*) Transcript: Laundry Trade Volume 1, Page 199T~ 
9835 



-47- 

A number of industries in addition to the hours control clauses 
attempted to regulate the owner operator problem through the application 
of minimum wage provisions. This was attempted despite the recognition 
that ovraer operators could not be compelled to pay themselves the minimum 
wages, but because of selling below cost prohibitions established by the 
codes. These prohibitions required the computation; of labor and other 
costs to determine the minimum selling of prices. By requiring owner 
operators to include themselves and /or .'members of their families as 
paid employees in computing labor costs, it was hoped that the price 
cutting due to sales below costs resulting from incomplete computations 
of consts wouB.be minimized. 

Only a handful of specifically included wage control provisions in 
which owner operators were directly mentioned. (*) However, opportunites 
for the exercise of owner-operator wage .'control were present in many 
industries. This was Cue to 'the fact that .many codes defined employees 
interms broad enough to include owner operators while engaged in mechanical 
or processing occupations and included as well prohibition against selling 
belov; costs. Thus, in the event an owner operator was suspected of selling 
below costs as the result of failure to include charges for his own 
labor and /or, the labor of members of -his family, as required by the 
particular code, and code violation proceedings were instituted, the 
burden of proof clearly rested with the accused to show that he had ma.de 
due allowance for such labor costs. 



(*) Sec tabulated listing - Appendix I 



9835 



-48- 

S. TABULATION OF N. H. A. CODE PROVISIONS AFFECTING- OWNER OPERATORS 

The .hours and wage control clauses contained in the approved codes 
of fair competition are listed on the Hours and Wages Tabulations respectively 
(Appendix Q, ) 

1. Hours Tabulations 

This listing" links the hours control clauses "with 105 codes (includ- 
ing several code industry subdivisions) . These clasues are tabulated 
under titles which indicate the purpose for which the clauses were adopted. 
Because of the broad phraseology of many of the provisions a considerable 
amount of overlap in the classifications, is inevitable. 

The tabulation shows the following: 

Under title A "Provisions controlling owner operators 
actual working hours as workers" two 
sub-titles are indicated; the first, 
entitled "Employers doing work of 
employees are subject to code control 
provisions as to hours of Labor" covers 
25 codes; the second entitled "Employers 
performing manual work or engaged in 
mechanical operations may not exceed 
employees maximum hours" applies to 
45 codes. 

Title B refers to provisions for starting and finishing 
periods of work. Under this title 

11 codes contain provision which 
establish limitations on employees' 
working time, either with respect to 
starting and finishing hours of work and/or 
the number of days per week; 

8 codes have clauses which name 
specific days in the week on which 
employees were prohibited from work- 



12 codes empower code authorities to 
establish starting aid finishing .hours 
and/or/provide for closing on certain 
days in the week. 

Title C is entitled "Provisions designed to prevent 

suberfuge." Under this title, a number of groups 
including officers, all members of a partnership, 
all members of a partnership but one, stock- 
holders, members of cooperative, members of the 
industry, owners and families of owners are de- 
clared by control clauses to be subject to maximum 

9835 



-49- 



code hours while at work as productive 
employees. A breakdown of these groups 
on the basis of codes shows the follow- 
ing : 

13 codes restrict officers to maximum 
code hours. 

26 codes restrict all members of a partner- 
ship . 

4 codes restrict all members .of a partner- 
ship but one. 

14 codes restrict stockholders . 

3 codes restrict members of coopera- 
tives. 

15 codes restrict members of the industry. 

14 codes restrict owners 

15 codes restrict families of owners. (*) 

N.R.A. CODE PROVISIONS RELATING TO WAGES 03 OTHER COMPENSATION FOR OWNER 
OPERATORS AND MEMBERS OF THEIR FAMILIES. 

Eighteen codes contain provisions relating to wages or other compensa- 
tion for owner operators and/or members of their families. As in the case 
of the hours control clauses some degree of overlap is present in a number 
of wage clauses. 

A tabulation of these clauses shows a breakdown into five groups, viz; 

4 codes contain clauses which state that employers 

and members of the industry who do work of employees are 
subject to code wage provisions; 

5 codes provide that relatives or members of employers 
families doing the work of employes are subject to 
code wage provisions; 

5 codes state that relatives other than husband or wife, 
while doing work of employees are subject to code wage 
provisions; 

6 codes provide that working partners, stockholders and 
others having proprietory interest are bound by code wage 
provisions; 

2 codes contain clauses to the effect that wages of members 
of industry who perform work of employees shall be included 
in the cost accounting. 

( *) Owner operators included as employees by code definitions. 



9835 



~5C- 



F. FACTORS IN DEVELOPMENT OF NRA FOLICY ON SUBJECT OF OWNER OPERATOR 
CONTROL. 

Even a cursory perusal of the transcripts of testimony covering code 
hearings at which the owner operator problem was discussed is sufficient 
to establish the fact that during the greater part of the code making 
period the National Recovery Administration had no fixed policy with 
regard to the question of control. Provisions for various codes were con- 
sidered on the basis of the particular circumstances involved. In a 
number of industries deputy administrators by the type and nature of 
their questions during code hearings evidenced doubt as to the legality 
of the proposed clauses, unwillingness to assume responsibility for their 
approval and occasionally undisguised hostility to the subject. True, 
many codes with control provisions were approved during the early days 
of NRA but the adoption of such clauses did not imply an administrative 
policy in favor of such provisions. The chief reason for the approval 
of the clauses was probably the pressure applied by organized groups of 
employers and/or employees who, as "truly representative groups" usually 
carried considerable weight and influence. Many codes with control 
clauses contained high labor standards. Administration representatives • ■ 
were anxious to hasten the codification of such industries for the salu- 
tory effect upon other industries. Hence, the apparent willingness of 
some deputy administrators to accept control clauses may be said to re- 
flect a desire to expedite the approval of such codes rather than out- 
right acceptance of the principles underlying the clauses. 

Uncertainty and doubt characterized the Administration's considera- 
tion of this subject until the very end of the code making and enforce- 
ment period. Few basic principles were established to guids the admin- 
istration. Deputy administrators as a rule knew very little about the 
actual operation of the clauses. This situation is testified to by a 
document which may be accepted as an attempt by the administration to 
formulate a policy for owner operator control. 3ecause of its importance 
and pertinence the document, consisting of a memorandum from Dr. L. C. 
Marshall, Executive Secretary of the National Industril Recovery Board 
to E. M. Jeffrey, bearing date of May 9th, 1935, and entitled "Memorandum 
from James E. Hughes, Research and Planning Division - Working Employers" 
is reproduced in its entirety: 

"I have just received a report from James E. Hughes of 
the Division of Research and Planning covering the operation 
of provisions in codes affecting employers doing the work of 
employees. Mr. Hughes has had various economic advisers in- 
quire into the situation in the 100 or more codes affected. 
These advisers were asked to contact Deputy Administrators, 
the Compliance Division, the Labor Advisory Board and other 
possible sources of information. 



9835 



-51- 

'"The pertinent paragraphs of Mr. Hughes' report are given 
below: 

In spite of the thoroughness of this search, only one 
conclusion can be reached - that is that the informa- 
tion available, by virtue of its scarcity, indicates 
that such provisions are .quite generally being ignored. 
In the majority of cases there was no evidence of 
complaints in the Compliance Office and a complet blank 
was drawn vihen we questioned the Deputies on the sub- 
ject. Some Deputies assumed that lack of complaint 
represented complete-compliance while others felt 
that the provision was inoperative . In the former 
case I fear the Deputies were inclined to be a little 
optimistic. 

'As a whole, it is my feeling that this provision is 
neither working nor workable. I have in my files 
the reports of the individual Advisers in ; case you 
wish to go into this matter more thoroughly. 1 ' 

"In the light of this situation, there whould be a definite presump- 
tion against inserting in codes provisions restricting the hours that 
a bona-fide employer' may work in his own business. This general pre- 
sumption may be overcome by adequate showing of needs and facts; and it 
does not extend to safeguards against subterfuge, such as the designa- 
tion of wage earners as ostensible partners, if such can be devised in 
form appropriate for seeming compliance and enforcement." 

The formulation of policy is contained in the last paragraph of Mr. 
Marshall's memorandum. T e conclusion which may be drawn from the con- 
tents of this paragraph is that the administration henceforth contemplated 
following a policy of extreme caution with regard to owner operator 
control, one which in all likelihood would have been at variance with 
the expressed purposes of trade unions on the subject. 

1. Influence of groups within 1IRA 

A number of the National Recovery Administration's subsidiary groups 
and boards during various stages of codification expressed statements, 
declarations and opinions on the subject of owner-operator control which 
reflected their respective viewpoints. These statements and opinions 
are important because some of them represent experiences and convictions 
of groups which were vitally concerned with the problem. Moreover, NHA 
policy was in the last analysis a composite of the conflicting policies 
of its component groups. 

(a) LABOR ADVISORY BOARD 

The position of the Labor Advisory Board as regards owner-operator 
control was identical with that of union labor representatives. The 
policy of the Board favored owner-operator control not only to minimise 
possibilities of fraud and subterfuge in the matter of hours and compensa- 
tion but for the purposes of increasing employment, raising wage levels 

9835 



-53- 

and extending opportunities for trade union organization. The philosophy 
of labor on this subject has elsewhere "been expressed and does not re- 
quire restatement. It is appropriate, however, to refer to an official 
Labor Advisory Board document which succintly expressed the position 
of the hoard on owner operator control and the reasons for this stand. 
This document was in the nature of a memorandum from Solomon Barkin, 
Assistant Executive Director of the Labor Advisory Board to James E. 
Hughes, Division of Research and Planning under date of May 15, 1935, 
entitled "Problem of Controlling Hours for owner operator." Citing 
Mr. 3arker, Siting the position of the Labor Advisory Board with regard 
to this problem, stated: 

"At the suggestion of Mr. Bishop, I am attaching hereto a 
list of industries where it is necessary to provide that 
the employer shall also be subject to the hours of work 
regulating employees. The reasons impelling us to re- 
quest the inclusion of such a provision in t ; i codes are 
assentially as follows: 

1. The employer participates directly in the pro- 
duction processes. 

2. Such participation in production deprives em- 
ployees within the industry of significant amounts 
of work and thereby minimizes possible reemployment. 

3. Tlie absence of any control of the hours may lead 
to an increase in the number of such employers or 
members of the industry working on their own ac- 
count, and to an increase in partnerships as a means 
of evading code provisions. 

4. The control of Labor conditions for the rest of 
the industries is imperiled by the absence of this 
control. 

5. The absence of such control results in inequal- 
ities of labor costs. 

"These industries are primarily those which consist of many 
persons working on their own account or small unite where 
the production process is such that an individual's labor is 
not interrelated significantly with the other workers and 
consequently can perform completed processes by themselves. 
These are generally industries where manual labor is significant 
and where mechanization has proceeded largely in the terms 
of hand tools and simple operating machines. 

"I hope that the above is a sufficient and proper back- 
ground for approaching this problem. 



9835 



-53- 

"The control of this problem under codes has he en largely 
of two types: (l) A provision that either the employers 
and/or members of the industry shall 'be governed by the 
hour provisions; and. (2) specific opening and closing hours 
are established in order to assure compliance with the pro- 
visions in (l) . 

"I am submitting this, list of industries to you so that 
some member of your staff may review it to indicate whether 
the same is an adequate list of the industries where such 
problems do arise in. sufficient proportions to make regulations 
necessary, and whether other industries should be added." 

The above memorandum may be accepted as the basis of the NRA Labor 
Advisory Board policy with regard to owner-operator control. 

Legal Division ....... 

The Legal Division of the National Recovery Administration was 
greatly concerned with attempts to control owner operator working hours. 
This concern was based on the belief that Section 5 of the National 
Industrial Recovery Act. which read: 

"Nothing in this Act, and no regulation thereunder, shall 
prevent an individual from pursuing the vocation of manual 
labor and selling or trading the products thereof;" 

might prevent any control of owner-operators' working hours. The Legal 
Division's representatives approached this question with conservatism 
and restraint. During a number of code hearings when the question arose 
legal advisers emphasized the need for caution in drafting phraseology 
for the contemplated control clauses. For example, at the hearing on 
the Code for the Art Needlework Association on January 16th, 1934 in 
connection with the attempt to include a provision to restrict the hours 
of "members of the industry engaged in production work," the NRA legal 
adviser, Mr. Birnbaum, made the following statement: 

"This section clearly restricts the rights of individuals, 
and as such must be definitely substantiated by facts before 
it can be included in any code;****I tried to emphasize, the 
fact at the. very outset that because it is a limitation of 
personal rights, and if you look at it with a fair mind, you 
can see that it is — it should be substantiated by definite 
proof that this industry must have this kind of protection 
or else unfair competition will exist; and unless such proof 
can be presented at least from a legal standpoint, I cannot 
see how it can remain in the code.***Irorn a legal standpoint, 
unless it is definitely based upon evidence or facts to show 
that it is unfair competition, to members of this industry, 
no personal rights can be limited." 



9835 



■54- 



Anothpr reference to the legal division's stand on the question of 
owner-operator control is found in connection with the hearing of the Code 
for the" Fur Dressing and Fur Dyeing Industry. Here, the matter under 
consideration "as a proposed clause to eliminate or at least limit co- 
operative enterprise's which -ere established to evade the labor provisions 
of the code. During the course of 8 lengthy discussion on th° subject 
i: r . Ne-rnp.n, of th° 1'PA Legal Division stated! 

"7e had the same ouestion (owner-operator control - M. ?..) come 
up in the manufacturing code. We tried to have inserted in 
the code a provision that -as inserted in our labor agreements, 
that no mor° than t™o members of a firm or corporation "be 
allowed to do any productive labor whatsoever, w e wrangled 
around for several months and finally the legal division said 
it wa,s illegal, and could not insert it in the code, but 
inserted a clause something to this effect, that no emplovee 
or employer shall perform any productive labor -hatsoever, 
but onl^ ^ithin the hours that are specified in this code, 
and that is from 8: 30 in the morning until IS, and from 
1 'til 4:30, and five davs a ^^-, -hion is from Monday until 
Friday. That is the ^p^t -.-,<=. got around it." 

It must be remembered that in the absence of any general rolioy 
on the subject of own°r-operator control, va.rious legal advisers, inter- 
preting the la" on the basis of th°ir separate st\idy and judgment, w=re 
to arrive at different conclusions. This is shown by the variations 
in language and scone of the control clauses which were ad.onted. The 
restraining influence of the l=ga.l division is illustrated in a. number 
of hours control clauses which included the phrase "to the extent per- 
mitted, by the Act." Clearly, the inclusion of this nhras reveals 
doubt and uncertainty in the minds of the particular legal advisers as to 
the degree of control nermitted by th° so-called "Huey Long Amendment." 

The apolication of Section 5 of the Recovery Act to owner operator 
control and especially the I<=gal significance of the -ord "-prevent" as 
used. ther D in received the critical consideration of the Legal Division 
in August 1934. A memorandum w as issued August IB, 1S34, (*) "hich 
dealt with the judicial interpretation -placed xs.-oon the ^ov6. "prevent" in 
its relation to limitation of -production in business units. This 
memorandum cited a number of ca.s^s pertinent to the subject. The ■ 
conclusion reached was embod.ied. in the following paragraph: 

"An individual entre-oreneur cannot be stopped, from 
doing his own work by th a -orovisions of a. code. 
However, if a. code allying to the industry in which 
he is engaged prescribed, the number of hours for its 
workers, he nrobably cannot lawfully w 'rk more, than 
the prescribed number of hours. At least code provisions 
limiting the number of hours which on°. may ; T ork can be 
enforced aga.inst him if there is no unlawful control 
of the -produc tion of his busin°ss. It is believed that 
(*) Mp io r^'^.^ o" Law '!onc-rnin..fT ~ T .ovxs <? ? Labor Restrictions Upon In- 

dividu: 1 ! -nterprenevr, $175, F.E.A. La^al H°search. Avthor- 

F. A. King. (A-Q-oPndix ) . 
■' 9835 



-55- 

production control, especiall"" in emergency, is consti- 
tutional." 

An analysis of the conclusion shows that it dealt with two proposi- 
tions. Th° first concerned the right of 0"m o r ope-atcrs to engage in 
productive, manual or -processing occupations and the conclusion reached 
asserted the illegality of any code provision which prohibited an employer 
from following the vocation of manual la"bor or engaging in mechanical 
or -processing occupations, The second -proposition, on the other hand, 
upheld the legality of -provisions limiting owner-one-ators when engaged 
in -productive occupations to the maximum number of hours prescribed for 
workers in the particular codes. .: : '■ 

(c) Industrial Advisory Soard 

The Industrial Advisory Board followed a flexible policy with regard 
to owner o-perator control. A r°vie" of transorros dealing with discussions 
of code control -provisions indicates that the board's re-presentatives 
approved many cla~ i s°s without comment. . Ap-proval in such cases may have 
"been due to the recommendations of, trad.e associations and other organized 
"business iinits which frequently sponsored the clauses. 

The ado-ption of a. flexible policy w BS inevitable. The board was 
reauired to reflect th° viewpoints of all business and industry groans, 
large and small, organized and unorganized. Thus, in industries where 
the majority of enterprises were composed, of owner operators and. the 
minority of large scale employers, the board found it expedient to 
carefull-"- weigh the inflivence of both elements as related to the best 
inter°sts of the particular industries. 

If any conclusion may be dra^mi it is that while the Industrial 
Advisory 3oa-d supported attempts to regulate against owner operator 
subterfuge and fraud, it opposed clauses which by their language made 
it evident tha.t adoption "as sponsored chiefly by labor sources for the 
purpose of -protecting labor standards. A ca.se wen i n -point is found in 
the slit fabric manufacturing industry (*) decided by the Advisory 
Council. An amendment submitted by the Labor Advisory 3oa _, d. -pro-posed 
that "Any employer who does the work of an errolovee shall be subject 
to the provisions of this code as to hours of labor." The Administrative 
Officer referred the proposed a.mendment to the Advisory Council and the 
latter, in the course of its decision stated the following with regard- 
to the -position of the Industrial Advisory Board: 

"The Industrial Advisorv Board ( following its established 
policy on limitation of employers' hours) disapproved on 
the ground tha.t many small employers might be unable to 
make ends meet and might be forced to shut down completely 
if forbidden to work overtime themselves. " 

An analysis of the limited material available indicates that the 
Industrial Advisory Board.' s p>olicy on the subject of owner-operator 

(*) Decision No. 206, April ?, 1935, "Hours of Employers doing Pro- 
ductive ^ork; Slit Fabric Mfg, industry, Page 343, Volume 4, 
Advisory Council Decisions. 

9835 



-5G- 



control showed th<= following salient characteristics: 

(l) Opposition to limitation or control in industries where >.- 
the majority of enterprises *r° composed of own<=r 
operators; 

(?) Favorable to regulation "'hen necessary to combat fraud 
and subterfuge; 

(") Opposition (on constitutional basis) to control of on°~man 
operators; i. e. , ^ntr°nreneur s without employees; 

(4) Unfavorable to regulation where it appeared that such 
control would chiefly benefit organized labor, and not 
industry. 

The viewpoint of the boa"d with reference to noint 4o was obtained 
through informal conversation with Mr. Salter Thite, the former 
chairman of the Industrial Advisory Board. 



9835 



-57- 

i 
( d) Consumers Advisory Board 

As in the case of the Industrial Advisory Board, there is but 
little information in transcripts of code hearings to indicate whether 
during the course cf early code negotiations the Consumers Advisory 
Board took any definite stand, one way or another, with regard to owner 
operator control clause s e However, in the closing days of the code en- 
forcement period this board placed itself on rer.ord as being opposed 
to control clauses which allegedly in the interest of compliance, were 
designed to establish limitation of shop hours... 

The attitude of the Consumers' Board may he discerned in connec- 
tion with the appeal of several cases to the Advisory Council. 

(1) In the case of the Slit Fabric Manufacturing Industry (*) 
the Board stated apropos a proposed amendment that it "has no objec- 
tion if good reason can be shown for the amendment, although we doubt 
its enforceability and wisdom " 

(2) In the case of the dental laboratory industry a definite di- 
vision arose between owner operator laboratories and large establish- 
ments with most cf the industry's employees concerning the question of 
a Code provision which authorized compulsory Saturday closing in any 
areas in which a majority of the resident dental laboratories 'voted 
for such action* The Advisory Council in its decision' cf Hay 16(**) 
1935 indicated that the Consumers' Board had originally cited the 

case to the council because of .the dissatisfaction of. small laboratories 
with the operation of this particular provision. In this case the Con- 
sumers' Board assumed a- position. entirely at variance with that of labor 
and the code authority, both of which supported the provision as being 
in the best interests of the industry. The basis of the consumers 
Board's opposition lay in the. fear that the dental profession - the 
only "customers" of the laboratories - would be handicapped in providing 
service to patients of the profession. 

(3) In still another case - involving the precious jewelry produc- 
ing industry (***) the board submitted 'to the council the question of 
shop hours limitation. The problem arose, through a proposed amendment 
part of which read as follows.: 

"the mardmum hours herein provided for productive labor shall be 
utilized only between the. hours of eight (6) A Mo and six (6) 
P. Mo" 

The proponents of this amendment urged its approval in the interests 
of compliance with labor provisions, when the amendment was submitted 



(*) See pages immediately preceding for discussion of this code. 

(**) Decision Ho. 225;, Dental Laboratory Industry, Page 396, Volume 5, 
Advisory Council' s Decisions. 

(***) Decision No. 231, May 25, 1935. Precious Jewelry Producing In- 
dustry, Page 427 s Volume 5, Advisory Council's Decisions. 

9835 



-58- 

the Precious Jewelry Producing Code already contained a provision (Ar- 
ticle III, Section 2) limiting employers when performing the work of em- 
ployees to the employee ma:dmum hours. 

The Consumers' Board in expressing opposition to the shop hours 
limitation clause objected on the ground that "this alleged restriction 
of shop hours in the interests' of compliance may "be no more than a 
cloak for efforts on the part of the industry to restrict production, 
and that no 'showing has been made of the desirability or necessity of 
production limitation." 

The above cases indicate that while the Consumers 1 Advisory Board 
concurred, aj.be"it reluctantly, in approving clauses limiting the hours 
of employers when engaged in productive work, It opposed limitation of 
shop operating hours on the theory that this' latter form of control en- 
couraged restriction of production and therefore was inimical to the 
interests of consumers. 

.(e) Advisory Council 

The Advisory Council in the early part of 1935 promulgaged several 
decisions which dealt erdiaustively with the problem of owner operator 
control. Some reference to this decision has already been made in con- 
nection with the discussion of policies involving the Industrial and 
Consumers Advisory Boards. 

In the slit fabric industry case (*) the council discussed the 
type of control attempted through the use of a clause stating that "any 
employer who does the work of an employee shall be subject to the pro- 
visions of this code as to hours of labor." The -chief proponent of the 
clause was the Labor Advisory Board, but it is significant that the em- 
ployers .in the industry were reported as favoring its adoption. The 
Review Officer approved on the ground that "the deputy states that the 
purpose of this provision is to eliminate so-called partners who are 
brought in on a temporary basis as members of the firm only to evade 
the wage and hours provisions." 

The council reviewed briefly the history of owner-operator con- 
trol clauses and suggested two chief reasons for them; (l) to prevent 
employers from talcing their wage earners into ostensible partnership so 
as to evade the wage and hours provisions of the code and (2) to prevent 
undercutting of prices by producers whose own excessive hours of work 
enable them co reduce prices. 

The decision admitted the amendment would have the good effect of 
halting a certain type of code evasion, but it questioned the legality 
of controlling the hours of bona fide employers Aside from the ques- 
tion of principle, the council, advanced the following reasons to sup- 
port its recommendation for disapproval of the amendments 



(*) See pages immediately preceding for reference to this case. 



9835 



-53- 

(1) The clause was uiienf orceatile ; the industry was composed of 
small shops (about 100 producers having approximately 1,700 
employees) 

(2) In the event of a test case a jury would "be unlikely to con- 
■ vict a man for working hard in his own business 

(3) The effect of such a conviction on public opinion might be 
bad 

(4) This type of hour limitation might conflict with Section 3(a) 
of the NIPA, which bears on oppression of small enterprise 

It is. worthy of note that the council, notwithstanding its adverse 
recommendation because of the rea.sons cited, concluded by saying it 
recognized the danger of the ctistom alleged to be prevalent in the in- 
dustry;- i„ e«, code evasion through taking wage earners in as ostensible 
partners and suggested it would be sympathetic with efforts to devise safe- 
guards against fictitious "partners" as heretofore defined. 

The interpretation which may be drawn from this conclusion is that 
the Advisory Council concurred in the necessity of establishing owner-* 
operator control clauses designed to curb fictitious partnerships, cor-, ; 
porations and cooperatives but required the phraseology of such clauses 
to be definitive in character. It opposed limitation clauses which by 
their language were susceptible of controlling the working hours of 
bona-fide employers. This distinction is important because it shows a 
definite rejection of the claims of organized labor and industry (par- 
citularly the former) in many industries in which control of working 
employers' hours was necessary not only as a. precaution against subter- 
fuge, but as economic and social principles to effectuate the purposes 
of the Recovery Act, 

In addition to the above, the Advisory Council, in a number of 
cases, rendered decisions involving the problem of opening and closing 
regulations, or shop hours' restrictions. The cases decided were the . 
following: 

(1) For Dressing and Fur Eyeing Industry (*) 

(2) Dental Laboratory Industry (**) 

(3) Precious Jewelry Producing Industry (***) • , 



(*) Decision No,. 199,. March 21, 1935, Subject: Shop Hour Limitation 

Maximum Hours 
Compliance. 
Page 327, Volume 4, Advisory Council's Decisions, 

(**) Decision No. 225, May 16, 1935, Subject: Saturday Closing, 

Compulsory, 
Page 396, Volume 5, IBID 

(***) Decision No. 231, May 25, 1935. Subject: Limitation of Shop 

Hours Page 427, Volume 5, IBID. 
9835 



- 6C'- . 

(l) F ar Dressing and Fur Dyeing-, Case 

The fur dressing and fur dyeing industry case concerned an applica- 
tion for repeal of an amendment providing shop hour limitations upon work 
in the fancy dressing and rabbit dressing divisions of the industry. 
Repeal was applied for by the code authority on the ground that the amend- 
ment had not improved enforcement as hoped and that the larger dressing 
establishments had lost additional orders to smaller shops which had no 
hesitancy in violating code prohibitions against work during week-ends 
and thereby secured those orders received late in the week for Monday 
deliveries which large establishments complying with the code were 
forced to refuse. Representatives of organized labor protested with- 
drawal of the amendment asserting that labor is "better off with no code 
than with only the restriction of overtime, which is most difficult to 
enforce." Labor asserted that the code authority had made no serious 
attempt at enforcement and demanded that enforcement be carried out. 
Mr. Mclaughlin of the New York labor compliance office was quoted as 
having stated that until recently no cases had been referred to compli- 
ance by the Code Authority and that in his opinion the amendment limit- 
ing shop hours "is entirely fair, workable and enforceable." In opposi- 
tion to this opinion, the Industry's representative cited dozens of situa- 
tions that militant and conscientious enforcement could not apparently 
reach. 

The Council decided that the definite indisposition of the Indus- 
try and of the Code Authority and of many employees themselves to en- 
deavor further experiment with the amendment made its retention of slight 
or no value and recommended that the application to repeal the amendment 
be approved* 

(2) De ital Laboratory Case 

The dental laboratory case involved a provision for compulsory 
Saturday closing in any areas in which a majority of the resident dental 
laboratories voted for such action. Two decisions were rendered in this 
case. In the first decision the .council concurred in the recommenda- 
tion of the Consumers' 4dvisory Board that a stay in the operation of 
the clause be allowed. A reversal was noted in the second decision and 
the entire matter held in abeyance pending the then anticipated revision 
of codes* However, in the course of these decisions; the council 
stressed certain guides to policy which because of their significance are 
cited herewith. The thought of the council was developed in the follow- 
ing language: 

"If there is an important social or economic gain to be secured 
through a mode of action upon which the great majority of the lib* 
dustry is agreed, NRA. is bound to respect it. If the over-whelm- 
ing majority of an industry wants to bind all members to a course 
of action in which there is no particular harm and to which there 
is no strong objection from any source, HRA can excusably accomodate 
itself to the sentiment. If, however, there is no social or econo- 
mic issue at stake, and if the objective of the majority is defi- 
nitely opposed by the minority or by a considerable group of the 
customers of the industry, -there is clearly no obligation on NRA 
to write a law about it." 

9835 



■ -61- 

The council then suggested that "in the forthcoming process of code 
revision, a strong presumption should "be considered to stand against 
enactment of, the kind of provision here considered (compulsory Saturday 
closing - MR) a presumption capable of being lifted only by incontest- 
able proof that the ends of improved efficiency and compliance argued 
by the industry in its justification will be accomplished. If enacted, 
evidence of trouble in its operation should be sufficient cause for with- 
drawal." 

(3) Precious Jewelry Producing Case : 

Hie precious jewelry producing case involving the limitation of 
hours probably was the most important of the cases cited and evoked 
weighty and deliberate consideration. In all likelihood, had the pro- 
cess of codification continued the decision of the Advisory Council 
in this case would have contributed in great measure to the formulation 
of an owner-operator control policy for future guidance. 

In this case, the council touched upon most of the factors involved 
in the attempted owner-operator control program; viz, limitation of 
shop hours, owner-operator competition and the general problem of the 
little man in business. A portion of the council's decision is cited 
below not 'only because of its relationship to the particular case but 
because in a general way it deals with various phases of the control 
program as viewed by the council and it attempts to clarify the issues 
involved for the guidance of future administrative policy* It is par- 
ticularly appropriate to quote from this decision inasmuch as Ur. Marshall 
in submitting this case suggested that the council might also review, 
with shop hour limitation in mind 8 the " ter m s of the whole issue of the 
extent to which H.R.A. may safety go in deve lo ping detailed regulations 
for industry." , This particular part of the decision follows: 

"The declared purpose of this provision ('The maximum hours herein 
provided for productive -labor shall be utilized only between the 
hours of eight (8) A* M. and six (s) P, M.' - M.R.) is to assist 
efforts to secure compliance with Article III, Section 1 of the 
code dealing with employee hours of labor. The Deputy reports 
that during the depression many one' and two-man shops have ap- 
peared, composed of former employees of the larger establishments* 
These shops are alleged to be operating at all hours, presenting 
a compliance problem with which neither the Code Authority inves- 
tigators nor the Jewelry Workers' Union has been able to cope. 
The code limits employees to eight hours work per day. The small 
shops maintain no time clocks or time cards, and regardless of the 
time of the evening after six P. M. at which time investigators 
call on plants still operating, the explanation is always that the 
men have just started to work. The Industry believes that the 
only way to stop this kind of deception is to make it also a vio- 
lation of the code for shops to operate at all after six P. M« 
Petition for this action was officially presented by the Congress 
of Precious Jewelry Producers Inc., which is reported to represent 
the great majority of the industry. The industry is supported in 
this stand by the labor unions concerned. Notice of opportunity 
to be heard on the proposed amendment was published in the usual 
manner and distributed to the members of the Industry. No objec- 
tions were received. 



9835 



-63- 

Tne Consumers 1 Advisory Board objects on the ground 
that this alleged restriction of shop hours in the interest .of 
compliance may he ,no more than a cloak for efforts on the part of 
the Industry to restrict production. They then proceed to argue 
■that there has heen no showing whatever of the desirability or 
necessity of production limitation. *****uo evidence .has been 
presented that the Industry is particularly interested in ;_• ; 

limiting output, whereas all elements in the Industry are 
agreed on the facts (l) compliance with the eight hour day 
provision of the code has broken down and (2) that the chief, 
reason for its failure has heen the lack of any means of 
proving that, employees, working after six P. M. had already' 
worked a full day even though a moral certainty to that effect , - . : ; 
existed. : - ' :'...'•' •••.'.;.■: «-.i - 

The Council, is not greatly concerned about the possibility,:, : j..; 
of this provision being used, in this industry, as an artful io ■■;-., '.,;- ; 
.means- of giving fche force of lav; to curtailment of production. 
It. is ieasy to heljev3._that under present circumstances' pro-*- ;■.}. 
iducers of luxury goods do not have to struggle to keep dowhV. 
production in the sense characteristic of heavily mechanized- ■ 
industries, producing staple goods, which in turn supports an 
'inclination to accept the provision at its face value. 

The figure of the little man also appears in this picture.. 
Thera. is a -p rovision in the Code (Article III, Section 2) which . 
11m irt q ■erapxoy ers '..'hen perform i ng the work of employees to the 
employ . 3 hours elsewhere prescribed . This type of paragraph 
is cor; ion 'to many codes. The Purpose of the particular amend - 
ment h ; ?.re considered could not be fully realized without it . 
The Council assumes that this provision is not open to 'question 
in the immediate case. Yet it does arouse a little uneasiness 
about the future of craftsmen or very small employers in the 
kind of economy we are setting up. Many of these men virtually 
live by their ability and willingness to give service in unor- 
thodox ways and to drive themselves for their own benefit a 

-little harder than wealthier competitors. This sort of inde- 
pendence, has been basic in the history and philosophy of 
American growth, and when it is hedged for purpose made legi- 
timate by other phases of the program it has to be done 
cautiously. Standing against this thought, of course, are the 

■fundamental considerations that led to the insertion of such 
provisions in codes in the first place, namely, the possibility 
that if small employers are left too free they will be enabled 
to put up a brand of competition against larger establishments 
which will force the latter in turn to lower their labor 
standards and so break down the entire code. This sort of 
proposition cannot be argued in the abstract. The only reason 
for admitting it at this point is to make sure that the exist- 
ence of the problem is recognized and wall be' given due consid- 
eration in particular cases., 

The Administration may also be properly concerned over the 
spectacle provided here of one provision being passed on its merits 
(limitation of man hours), a second to help enforce the first (limi- 
tation of employer hours), and now a third to help enforce the 
other two (limitation of shop hours). The use of laws for 



-63- 

slcuthing purposes has to "be limited somewhere, which again is a 
point to be weighed in particular cases. 

EECOKMHKIDATIOIIS: 

General: The restriction of shop hour's is a form of metic- 
ulous regulation of industry which the Council views with disfavor. 
There is no economic or social evil necessarily involved, calling 
insistently for a.ction by the Federal Government. Furthermore, 
such regulation may act as a restricting force on production, - 

the limiting of establishment hours having quite different comp- 
lications from the reduction of employee hours. In the one case, 
production can be increased only by increased capital investment, 
vdiich may or may not be socially desirable; on the other, product- 
ion can be increased by adding to the labor force, e, clear social 
gain. 

■ The Council finds two situations in v^hich shop hour limitations 
may be permissible; 

(a.) Where restriction of production has been recognized as 
desirable social policy, and this is demonstrated to be the most 
effective mechanism for accomplishing this result; 

(b) Where restriction of production will clearly not result, 
and the limitation of shop hours will serve as an important support 
to enforcement. This condition will usually appear only where there 
are many small shops. Furthermore, it should only be employed 
where the limitation of working hours for individual operators lias 
been accepted by the Administration as necessary and desirable and 
after due consideration af the interests and point of view of small 
operators and labor. 

This problem is a neat illustration of the proposition that dev- 
ices cannot be approved or disapproved as such. We must look 
behind any particular device in any particular situation to det- 
ermine the grounds for its approval or disapproval. Approval in 
ono instance cannot be taken as precedent for approval in others, 
unless the governing circumstances are similar. 

Specific : 

The Council finds the proposed amendment to Article 111, Section 1 
of the Code for the Precious Jewelry Producing Industry, falling 
under class (b) noted above, and therefore recommends its approval. 
(See Decision Ho. 101) . " 

these 
Several important points emerge in analyzing /decisions. These may 
be accepted as a. guage recommended by the council for the Administration 
in treating the owner operator control program. In summary the points 
are: 

(l) A flexible policy is necessary: i. e. , different situations 
require different treatment. 



9835 



-64- 

(2) The wishes of a majority of members in an industry for a control 
clause do not necessarily imply that the objectives sought in the partic- 
ular instance are matters of social or economic desirability. The quest- 
ion to "be propounded in all cases is whether or not the proposed limitat- 
ion clause is in the interest of the social or economic well-being; 

(o) Though it is admitted that industry and "business development lias 
changed in that the economy now posseses many large scale enterprises as 
distinguished from its early characteristic - small establishments "based 
on individual craftsmanship, care should be exercised in the enactment 
and administration of laws designed to promote efficiency and industrial 
harmony on the basis of this development, so as not to oppress the numer- 
ous small employers and craftsmen (owner-operators) who remain; 

(4) Restriction of production may be socially desirable in some ind- 
ustries, but in all cases this must be definitely established before con- 
trol clauses are adopted; 

(5) Great care should bo exercised in drafting control provisions. 
Where the purpose of a clause is to guard against s^dbterfuge, the lang- 
uage employed should not indicate an intention to limit bona-fide emp- 
loyers. 

In short, the Advisory Council recommended that the owner-operator 
control problem should be approached with caution and deliberation and 
decided in each instance on the basis of particular needs, experiences 
and c ir cums tances . 



9835 



-65- 

C-. THE CONTROL PROG-RAM IN OPERATION 

It is unfortunate that for the purpose of this survey little inform- 
ation is available with regard to the decree of success or failure which 
characterized the operation of the control clauses in the more than 100 
codes. The existence of adequate data on this subject would materially 
assist definitely answering such questions as 1, the extent to which labor 
and industry cooperated in matters of enforcement, 2, the practicability 
of the control clauses, 3, the effect of the provisions in achieving NIRA 
objectives, and last but not least, 4, the reaction of owner-operators 
to the provisions, It will be recalled that L. C. Marshall, former 
Executive Secretary of the Rational Industrial Recovery Board points out 
the scarcity of information on the subject in his memorandum (*) on owner 
operator policy to E. B. Jeffery. In this memorandum Mr. Marshall stated 
apropos the scarcity of compliance and enforcement data: ■■ 

"In spite of the thoroughness of this search, only one conclusion 
can be reached - that is that the information available, by virtue of its 
scarcity, indicates that such provisions are quite generally being ignored. 
In. the majority of cases there. .was.' no___e.Yi d. ence of complaints .in .the 
Compliance Office. 11 

The assumption embodied in Mr. Marshall's conclusion while generally 
indicative of the stiua'tion, may be susceptible of some qualification in 
that absence of data need not always be interpreted to indicate that the 
control clauses were disregarded. If any gauge for the determination of 
compliance may be set up with the meager information available it may 
perhaps be based on the extent of organization in the particular industries. 
Thus where industry and labor were highly organized and the control clauses 
adopted as the result of joint efforts, it is very likely that a fair 
degree of compliance prevailed. By the same token it may be assumed that 
industries and trades where labor was weak and code authorities impotent, 
control clauses were ineffective and in many instances inoperative. 

1 • Pro blems in Enforcement. 

The attempt to control the maximum hours of employers and other owner 
operators inherently carried with it a number of problems. Because of 
incomplete voluntary compliance it was necessary to devise ways and means 
to enforce the control clauses. Most of the problems arose from this 
difficult task. 

If it may be assumed that in general enforcement was difficult, it was 
undoubtedly made so by the following conditions which existed: 

(a) Misunderstanding as to the scope of the control clauses. 

(b) Difficulty of detecting and/or proving violations. 

(c) Legal difficulties 

(d) Traditional sympathy for the "little fellow". 

(e) Weakness of some unions and code authorities. 

These conditions will be briefly reviewed. 



(*) See Factors in Development of NRA Policy on Subject of Owner Operator 
Control - preceeding pages. 



-66- 

(a) Misunderstanding as to Scope of Control Devices 

The first difficulty was "basic and resulted from hurried drafting of 
control clauses and the apparent failure of some of the interested groups 
to circumscribe precisely, or agree upon the areas in which the provisions 
were intended to operate. This is supported "by the fact that many transcripts 
of hearings on codes with owner operator control clauses, failed to reveal 
any discussion whatsoever, or at "best showed extremely limited consideration 
of the problem in the particular industries and the relationship of the 
proposed clause to the problem. (*) 

Because of the absence of adequate discussion and explanation of the 
proposed corrective measures in these cases it is possible that misunder- 
standing and confusion existed in the minds of administrators and advisers as to the 
scope of the provisions. It is perhaps safe to assume that in a number of 
instances, modified provisions, more susceptible of enforcement than tho c &e ;;! -' 
adopted, have resulted, had the clauses been subjected to a thorough analysis 
as to scope and language. This actually resulted in a number of cases. 

The phraseology of some of the clauses was such as to permit application 
of the provisions to bona-fide employers as well as to fictitious partners 
and stockholders. While it is true that this is precisely what many labor 
and industry leaders intended, it is doubtful that Administration represen- 
tatives would have permitted such types of clauses to enter the codes, had 
they possessed a clearer idea of the implications involved. 

The weakness of the language employed in many control provisions became 
evident only after adoption and undoubtedly contributed in great measure to 
the poor showing in compliance and enforcement. 

(b) Difficulty of Detecting and/or Proving Violations 

A major obstacle to effective enforcement of owner operator control 
provisions was' the difficulty of detecting and/or proving violations. The 
chief reason for this difficulty were twofold; (l) the unwillingness of 
employees to prefer charges and (2) the difficulty of proving violations 
through other means. 

As to the first 'proposition it should be borne in mind that the average 
owner-operator establishment consisted of an employer and a few workers. The 
relationship between employer and employees in such enterprises usually was 
more personal than in the case of larger establishments. Thus, though 
employees may have known of their employers' hours violation a number of 
reasons may have contributed to their failure to prefer charges. These 
included the belief in a sense of honor and duty to an employer with whom, 
employees stood in close personal relationship, fear of loss of position 
through the ability of the employer to detect the source of the complaint, 
and a conviction that longer hours for the employer were necessary as a 
means of maintaining competition with larger and more successful firms. 



(*) As a general rule this was more true as regards clauses sponsored 
by industry groups than by labor unions. 

9835 



-67- 

The difficulty of proving violation in cases whore employees refused to 
prefer charges was pronounced. Many owner operators conducted their enter- 
prises in private residences, garages and other places difficult' to police. 
Investigators experienced trouble in entering such premises and in estab- 
lishing prima face evidence of violation even where the facts disclosed upon 
entry warranted apprehension of the owner-operator as a violator. An 
excellent illustration of these difficulties is found in the dental 
laboratory industry. In the city of Washington several laboratories 
suspected of operating after code hours wore visited by investigators. (*) 
Among the circumstances which contributed to the suspicion was the fact 
that the window shades in the particular laboratories were frequently pulled 
down late at night while the lights burned. Upon entering one of these 
laboratories, its owner when apprehended in the act of repairing a dental 
bridge claimed he was performing an "experiment" and was not engaged in 
"mechanical work." Obviously proof of hours violation in such a situation 
was difficult of presentation. 

Another illustration of difficulty in proving violations may be found 
in the precious jewelry producing industry. Mien the Labor Advisory Board 
sponsored an amendment to establish opening and closing hours for shops in 
this industry the case was submitted to the Advisory Council. The Council 
in its decision pointed out that: 

"The Deputy reports that during the depression many one and two-man 
shops have appeared, composed of former employees of the larger establish- 
ments. These shops are alleged to be operating at all hours, presenting a 
compliance problem with which neither the Code Authority investigators nor 
the Jewelry Workers' Union has been able to cope. The code limits employees 
to eight hours work per day. The small shops maintain no time clocks or 
time cards, and regardless of the time of the .evening after six F.M._.at 
which time investigators call on jplants .still ope rat i ng.,., the explanation 
is alw ay s tha t the men have .just started to. work.*** * " ( * * ) 

Many owner-operator establishments were almost entirely staffed with 
members of the owners' families. Under such circumstances it was almost 
impossible to expect any cooperation on the part of nominal employees in 
connection with attempts to prove alleged hours violations. This fact played 
a prominent part in the low degree of enforcement in some of the retail and 
service codes. 

In general, it may be concluded that in a great many industries the 
obstacles to effective enforcement and/or establishing proof of violation 
of hours provisions by owner operators were such as to preclude the possibility 
of serious efforts in that direction. In those industries the control 
provisions remained inoperative. 

(c) Legal Restraints 

The conviction that many owner-operator control provisions were illegal 
may have contributed in great measure to poor enforcement. Data previously 
cited from transcripts indicate that at least some legal advisors doubted 



(*) Facts taken from correspondence Files, Dental Laboratory Industry, #142. 
(**) Decision No. 231, Precious Jewelry Producing Industry May 25, 1935, 

Advisory Council's Decisions, Volume 5, Page 427. 
QR3B 



-68- 

the enf orcibility of the provisions. Informal conferences T 'ith sowe 
of the former deputy administrators in charge of codes (*) rath owner- 
ooerrtor control provisions ncint to the fact th^t this belief was 
shared by then. 

The major le~xl nroblen which effected attempts to enforce owaer 
o^errtor control clauses wrs the fear that the Recovery .act prohibited 
the limitation attempted by these clauses. Reference to this nroblen 
lies been ma.de elsewhere herein. (**) It is also nertinent to note th-^t 
another factor may have influenced enforcement of some codes with o^ner 
ooerr tor control clauses. This second nroposition concerns the intra 
st^te character of some of the tildes and industries (***) which "-ere 
codified and in which owner onerrtor control wa.s attempted* ".mile 
the nature of this renort does not "oerrlit an extended development of 
the problems involved in the attended regulation of industries whicU 
were intra state in character, it should be Mentioned that a helief 
existed in sone Quarters both in and outside of "IRA that enforcement of 
sone of these codes would be difficxi.lt, in consequence of the con- 
stitxitional restraint uoon federal regulation of intrastate connerce. 
jh. number of cases involving the servicfL^od^s were subjected to judicial 
test in sta.te and federal Courts and /their validity as to the propositions 
tested, but there is no record of any rtteript to enforce owner-onerator 
control provisions of these codes throu ;h juc.icia-1 proceedings. 

That some doubt existed in jPlA. circles as to trie legal basis of 
enforcenent in connection with codes of this type nay be gauged by the 
fa.ct that encouragenent was extended to the development of state re- 
covery acts to facilitate local enforcenent, such as the hew York Sta.te 
Shachno Act. (****) 



(*) Dental laboratory, 

barber shop - laundry. ' 

(**) See Legal Division T 'olic' r . Also, A??.1:~)III J Memorandum of 
Law concerning hoxirs of L?bor restrictions unon Individual 
Entrepreneurs. 

(***) Some of the service trad.es in Particular. 

(****) An Act through '-rhich Hew York State ntteumted to extend state 
validity to codes, orders arid decrees executed under the 1"IBA 
and to designr to such codes,' etc., subject to enforce ent by 
State as well as Pederal authorities. Declared unconstitutional 
by the highest court of the State. 



9.J35 



-69- 

A number of States on their own volition enacted State Recovery Acts 
modeled after the NIRA. It is owrthy of note that under one of these 
state recovery laws (Wisconsin) control of : owner-operators in a ser- 
vice trade was attempted through a code and such control denied by the 
Courts. .The case involved the barber shop Industry and the court in 
its opinion held: ■■•;. 

"The Code of Fair Competition for the Barber 
Trade adopted under the Wisconsin Recovery Act, 
is void as to one-chair sh op barbers innr.far ns 
it fixes the number of hours which such a bar- 
ber may work in his, shop, and the am ou nt which 
he may charge for services . The operation of a 
one-chair shop barber shop does not constitute 
trade or industry within the meaning of the Act."(*) 

In summary, while there are few factual data to support any con- to __, 
elusions, it does appear likely that had the question arisen^ of attempting/* 
force owner-operator control provisions in codes of industries not 
clearly interstate in character, a policy of restraint and caution 
would have influenced NEA enforecement. " 

( d) Public Opinion and the "Little Fellow" 

public opinion was a factor of considerable importance in influ- 
encing enforcement of owner operator control clauses. Traditional 
sympathy for the efforts of the "little fellow" to earn a livelihood 
in the face of large scale corporate and chair competition obviously 
necessitate a careful approach to the problem of enforcing code control 
provisions which in some of their implications were believed to con- 
travene established economic and social policies. It should be remem- 
bered that the fear that IT I HA might result in oppression of small en- 
terprise emphasized by the late Senator Long during consideration of 
the Recovery Act by the United States Senate resulted in t he adoption 
of an amendment to safeguard the right of the individual to engage in 
manual labor and to sell or trade the products thereof. Many persons . 
including some with considerable influence disagreed with the conten- 
tion of organized Labor and employer-groups that competition of the 
type offered by owner operators lowered the general levels of competi- 
tion. These individuals decried attempts to regulate working conditions 
affecting small enterprises,, which of course included owner-operators. 
They based their objections to such control on the fear that it would 
drive many owner-operators out of business. Among the reasons general- 
ly advanced for a. policy in favor of owner- operator establishments was 
the claim that a. policy in favor of owner-operator establishments wa,s 
the claim that in many industries these served as answers to the prob- 
lem of workers displaced by technological improvements. It was also 
claimed that possibilities of owner opera.tors ruinous competition to 
establishments with many employees were limited, due to their small 
output plus their occasional tendency to keep prices up. 

(*) State of Wisconsin V. Dudley et al., Cir. Ct., Wood Co., Wise, 
Oct. 30, 1934, (Park, J. ) Leading Decisions - IT. R. A. Office 
Manual, Part V. VII-B, V-E-44d. 

9835 



-70- 

Undoubtedly, protests against alleged oppression of small business 
which were made periodically during code administration, "by persons 
prominent in public life (*) contributed to a cautious policy in con- 
nection with enforcement of owner operator control clauses. A question 
of practical politics was involved as it was feared that if KRA was ac- 
cused of persecuting the "little fellow" it would suffer a loss in 
prestige. 

That this fear was probably based on ample grounds is the conclusion 
one may draw by harking back to public reaction manifested in connection 
with the arrest and conviction of a tailor in the famous Maged case (**) 
on the ground of violating the price provisions of the New Jersey Clean- 
ing and Dyeing Code. 

2. Sumir. ry of Available Enforcement Data 

Some meager date are available with reference to enforcement of 
owner operator hours control provisions. This information is presented in 
Tables 19 and 20 (Appendix K). 

Table #19 summarizes hours violations complaints affecting owner 
operators under all codes, and table #20 presents comparable data for 
several selected industries. 

The information contained in these tables is derived from complaint 
statistics for violation of labor provisions compiled by the Statistical 
Section of the MA Field Divisions and the material is based on complaints 
of violations handled by state offices of the compliance divisions. 

Only fragmantory data are contained in the tables. The statistical 
section in preparing the data on which the tables are based pointed out 
that the cases included in the report are those which state offices of 
the Compliance Division investigated and handled to a conclusion, those 
which were handled in part by ether agencies but subject to the final re- 
sponsibility of the compliance offices and those investigated and pending 
on May 27, 1935. The following classes of cases were not included: those 
referred for further action to the Washington office of the Compliance 
Division, to regional offices, or the Federal and state enforcement 
agencies; cases referred to code authorities in the first instance; and 
complaints referred to special agencies such as the Petroleum Labor Policy 
Board and the various textile boards. Complaints which were rejected as 
being insufficient or not setting forth facts constituting violation 
("primary objects") are also excluded. 

Three types of violation owner operator hours control clauses are in- 
cluded in the tables. They are as follows; (l) Employer working more 
than code maximum where prohibited; (2) Exceeding permitted number of per- 
sons working unlimited hours; (3)' Working during hours of the day not per- 
mitted by code. 

(*) The Darrow Report. Members of the United States Senate. 

(**) State v. Maged, C.P. Ct. , Jersey City, N. J. Apr. 20, 1934. (Kinkead, J.) 
Office Manual 5 - Leading Decisions-VII-C V-E-45. 

9835 



-71- 

Table #19, which presents a summary for' all codes, classifies the vio- 
lations under these three types, whereas table #20, which deals with 
several selected industries, covers the types of violations on a com- 
posite basis. 

A total of 695 cases is presented by Table 19. Of these, 531 were 
adjusted, 133 dropped and 31 pending as of Hay 27, 1935. 
The report upon which the tables are based explains the adjustments 
as "dockets satisfactorily closed by the state office" and states that 
"While the Division' s policy as to adjustment underwent development 
and change during the 19 months of its existence, the adjustment of 
working conditions within an establishment to bring about full con- 
formitj r of working conditions with code r.eouirements was always con- 
sidered essential." 

Dropped cases represent, those in which violations were found but 
where administrative action could not effect adjustments and where 
litigation was not desirable,. 

Table #20 presents data for the following industries: baking, 
barber shop, dental laboratory, pleating, stitching & bonnaz, etc., 
retail solid fuel, and Schiffili, hand machine embroidery. 
A total of 179 cases are covered. 70 were adjusted, 83 were declared 
"no violations" and 26 were dropped.. The largest number of cases was 
indicated under Barber Shop Trade violations. 

In the absence of satisfactory explanatory data as regards the 
na.ture of the reported "adjustments" it is difficult to arrive at any 
conclusion, concerning the success or failure of these enforcement 
activities. lurther study of individual case records would undoubted- 
ly assist in arriving at a satisfactory understanding of this problem. 



9835 



-72- 

C HAPTSB III. 

AN APPRAISAL OF TEE PROBLEM AND THE PROGRAM 

A. SOME QUESTIONS AND ANSWERS . 

The NEA program of control for owner operators was developed on the 
"basis of trial and error. The code control devices, like other features 
of the recovery program, were formulated with little precedent and with 
only partial understanding of all the implications and consequences 
involved. It was assumed that an emergency situation necessitated 
departure from past economic and social practices and the program for 
owner-operator control was advanced as an answer to one aspect of the 
emergency. 

An appraisal of the problem and the program must consider the fol- 
lowing three "basic questions and attempt to formulate replies on the 
"basis of available data: 

(1) Was a program for owner operator control necessary under 

NEA? 

(2) Was the adopted program successful? 

(3) What were the salient weaknesses of the particular program? 

1. Necessity Eor An Owner Operator Control Program 

The owner-operator control program was presented to and accepted 
by NEA essentially as a plan on behalf of organized labor to meet 
certain problems which had proven troublesome over a period of years. 
The demand for a control program, in addition to its labor origin, was 
supported by a considerable number of trade associations, particularly 
those which traditionally maintained friendly relations with organized 
labor. The control devices were urged as necessary to overcome obsta- 
cles to the achievement of NIEA objectives. 

The problem of control concerned itself with the following: 

/ 
/ 

(a) Limiting the hours of work of individuals; i. e. , employ- 
ers, members of industry operating on their own account and members 
of own r .--operators families; 

(I) Limiting production; 

(c) Imposing minimum rates of compensation for owner- operators 
and members of their families. 

To achieve the first objective, codes adopted devices whioh restrict- 
ed employers when engaged in productive occupations as distinguished 
from managerial activities, to the maximum number of hours prescribed 
for employees. In addition, some codes limited the number of co-pro- 
prietors or partners permitted to engage in mechanical operations and 
manual labor. 

9835 



-73- 

The second objective - limitation of production - was attempted 
through the establishment of starting and finishing hours regulations, 
applicable to all persons, including employers, proprietors and members 
of industry operating on their own account* The primary purpose in 
establishing this type of control was to insure the successful func- 
tioning of the first method of regulation, namely, the observance of 
maximum hours by working employers and other owner-operators. 

Finally, in a limited number of codes, devices were established to 
control the compensation of owner-operators and members of their fam- 
ilies. This was done to prevent price cutting based on disregard of 
labor costs. 

A review of the reasons advanced by the proponents of code control 
devices shows the following arguments advanced: 

(1) The large number of employers participating directly 
in the production processes made it important 

that they be considered in any program based on 
maximum hours of operation and work. 

(2) Such participation in production deprived employees of 
significant amounts of work and thereby minimized possible 
r e emp lo ymen t ; 

(3) The absence of control devices resulted in an increase of 
fictitious partnerships to evade code provisions; 

(4) .The absence of such control devices resulted in inequal- 
ities of labor costs; 

(5) The control of labor conditions for many industries was 
imperilled by the absence of control devices. 

(6) The absence of control clauses enabled owner-operators 
to maintain unfair competitive advantages over other 
employers who were subject to code provisions. 

In support of these reasons trade union and trade association 
representatives cited facts relative to conditions in the several in- 
dustries which in their opinions necessitated a program of control 
such as was presented to NBA. (*) 

Employers were concerned with the program of control, although not 
to the same extent as labor. Such factors as prioe cutting, sweat- 
shop products and low labor costs based on poor workmanship, were of 
vital interest to employers who operated under what may be described 
as an enlightened labor policy, which rested on observance of reason- 
able hours, fair wages and collective bargaining with labor. 

Labor had one advantage over employers in that it was united on the 
necessity of a program whereas the latter wore frequently in disagreement . 
(*) See testimony of proponents of control devices - Chapter II - The 
NEA Program of control 

9835 



-74- 

This was due to the large number of owner operators in some industries. 
The division of employers on this subject was reflected- 'in the attitude 
of the Industrial Advisory Board which was : compelled to consider the 
influence and interests of owner operators. This board, as has been 
previously indicated, pursued a somewhat non-committal policy of expe- 
diency, which in some instances manifested itself in serious opposition 
to control devices. The position of the Labor Advisory Board, on the 
other hand, was consistent in its adherence to a program for control. 

When the owner-operator control program was adopted serious unem- 
ployment prevailed in many industries. Reemployment and the promotion 
of standards of fair competition were stressed as primary objectives. 
The attainment of these objectives was necessarily influenced and 
affected by the factor of owner-operator competition. Trade unions and 
business groups obviously had no definite idea as to the increase in 
employment that might result through the enactment of their program, 
nor could they reduce to tangible equations the anticipated degree of 
improvement in the levels of competition. They could and did outline a 
broad policy based on experience and anticipated need. This policy 
declared that the limitation of owner-operators working hours and the 
reasonable control of other factors which entered into the functioning 
of these types of enterprise* would assist in reducing unemployment, 
stabilizing labor conditions and improving standards of business compe- 
tition. The trade unions, with years of experience in the matter stated 
they were in the best possible position to prescribe the necessary 
remedies. 

If the control program is considered primarily as a plan adopted 
on behald of labor and if the reasons advanced in support of the pro- 
gram are accepted as valid ~ and no evidence appears to the contrary - 
this program, or at least some method of control calculated to accom- 
plish the same purposes was necessary to effectuate the purposes of 
the Recovery Act, This conclusion rests upon the validity of the facts 
presented to indicate the competitive significance of the owner-operator. 

2. Success of the Particular Program 

Was the particular program of control which was adopted by NRA 
successful? A comprehensive and thorough evaluation of the operation 
of the program would require much additional study. No complete ap- 
praisal is possible with access to only NRA sources. The scarcity of 
NRA material has been previously referred to in connection with Mr. 
Marshall's memorandum on compliance and enforcement. (*) 

In this memorandum Mr, Marshall pointed out that a thorough explora-*. 
tion of ERA sources failed to disclose data to support any conclusion 
as to the manner in which the control devices functioned. In consequence 
of this situation he indicated one was free to reach one of two conclu- 
sions, namely; either the devices were uniformly effective and the 
program enforced or the clauses were totally disregarded and no attempts 
made in the direction of enforcement. The author of the memorandum 
indicated that he favored the latter conclusion. 



(*) See Mr. L, C. Marshall's memorandum to James E. Hughes - Chapter II. 
9835 



-75- 

Mr. Marshall's conclusion on any subject pertaining to NBA deserves 
high regard. In his position of responsibility he received unusual 
opportunities to observe and learn many facts relating to the operation 
of the codes. Yet it must be remembered that in this instance his con- 
clusion was by his own admission not based upon substantial, factual 
information. 

The NBA program of control was a program by and on behalf of 
organized labor,, 'To a lesser extent it was sponsored "ay tra.de associa- 
tions. In the absence of NBA sources of information and material and 
in the pursuit of further analysis and appraisal of the progi-am's 
operation, the files of trade unions and trade associations should be 
studied and their officers consulted. Because of the limitation of 
time this has not been done. Until it is accomplished no one is 
able to state with assurance whether or not the program was successful 
and in the latter instance what degree of success characterised its 
operation. 

Inasmuch as an objective appraisal cannot be undertaken the only 
conclusion possible under the circumstances must of necessity be in 
the nature an opinion based upon limited NBA data, and an understand- 
ing of the importance of the owner- operator problem to the labor organ- 
izations which proposed it. On this basis, it is concluded that the pro- 
gram was successful in the industries which were highly unionized and 
where strong code authorities existed. It should not be difficult 
to appreciate the reasons for this conclusion. Trade unions and code 
authorities may be presumed to have worked in harmony in the enforce- 
ment of the control devices because they had a common objective in 
view. These organizations possessed intricate arid tested machinery for 
collective action, y/hich could easily be employed in detecting vio- 
lations and in policing owner-operator establishments. Organized work- 
ers in these industries traditionally regarded their unionism in. a very 
serious light and were prepared to make sacrifices and subordinate 
individual desires to achieve a common purpose. In other words, 
it is reasonable to assume that trade union members willingly consti- 
tuted themselves committees of enforcement to observe operation of 
owner-operator control devices and detect violations. Many of these 
labor organizations- were financially in a position to undertake and 
support ambitious programs of code enforcement. And, the fact that 
few instances of violation reached compliance officers need not be 
interpreted to indicate that enforcement was not undertaken. It is 
more logical to assume that in highly organized fields, initial vio- 
lators were sufficiently impressed by the persuasive efforts of the 
organizations of workers and employers and were thus restrained from 
further violations. The influence of some of these labor organizations 
during the NBA period as well as their possible display of strength 
may be guaged from their increase in membership. As an illustration, 
the case of the International Ladies Garment Workers Union may be cited. 
This organization exercised jurisdiction over a number of industry 
divisions which were concerned with the owner operator problem. 
Immediately prior to the passage of the NIBA the I.S.G. W.U. had a 
membership of about 25,000, but within several months after the Eecovery 
Act's enactment this h ad increased to 150,000, (*) and the organization 
(* ) Membership records - American Federation of Labor 

9 835 



-76- 

boasted of cm almost lOOfo unionized field. Obviously, an organization 
capable of employing ITI3A lat>or provisions end l-BA machinery to achieve 
such phenomihal gain in membership, nay be presumed to have vigorously 
insisted upon the enforcement of labor -provisions in codes affecting its 
members, especially clauses which, if consistently violated, would have 
seriously in t erf erred with the union's program for reemployment and joint 
stabilization with management of the industry. 

The same situation was applicable in varying degrees to the unions 
in the fur, printing and building construction trades. Because of these 
facts it is believed that an analysis of the material and data which is 
undoubtedly in the possession of these organizations will support a con- 
clusion that owner operator control devices were effective in these in- 
dustries and that where compliance was not voluntary in nature, the 
collective efforts of the unions and organized employers resulted in the 
necessary control .and enforcement. 

H:f the same process of reasoning the conclusion reached with re- 
ference to the operation of control devices in industries not unionized 
and without .strong code authorities, is that in all likelihood initial 
efforts to enforce control clauses soon yielded to a realization of the 
practical obstacles in the way. In the course of time, and with in- 
creasing lack of proper administration and enforcement the control de- 
vices became inoperative. 

S. "."eakness of the Particular Program 

A number of factors associated with the owner operator control 
program point to a fatal weakness which undoubtedly contributed to poor 
enforcement in some trades end industries. This weakness manifested 
itself in connection with the hesitenc3 r and uncertainty with which the 
3ecover3 r Administration approached the problems of administration and 
enforcement. This situation is evidenced by the fact that after the 
program had been in operation almost two years, the Administration, in 
a number of instances, admitted it did not know whether an owner 
operator control program was desirable. (*) On various occasions during 
this period the iGA emphasized do\ibt as to whether it could legally even 
undertake to regulate the hours of employers and members of industry 
without violating several provisions of the Recovery Act. Yet, in the 
fac e of such doubt and uncertainty, control devices were incorporated 
in more than 100 codes. 

It seems reasonable to assume that many weaknesses in administration 
and in enforcement procedure of owner-operator control devices existed. 
It is not possible to describe the exact nature of these weaknesses, 
assuming they existed, because no serious effort seems to have been made 
to secure information as to the manner in which the control devices were 
administered or the type and degree of enforcement which was applied. It 
is probable that the weaknesses in this regard manifested themselves in 



(*) See decisions of Advisory Council cited in Chapter II. 



9335 



-77- 

connection with methods of industrial organisation and in lack of proper 
enforcement machinery. Irrespective of all o'ther assumptions in the 
premises, one seems to "be inescapable ; i.e., that the Administration, 
after granting concessions in the form of control clauses to labor or- 
ganizations, established a policy which virtually disregarded the control 
devices. 

It is "believed that two reasons contributed to the development 
of this policy of indifference.. The first consisted of the apparent 
unwillingness to test the issue of whether or not the FRA could legally 
enforce the control clauses. The second was the belief that a consider- 
able section of the American public was opposed to tiie objectives of the 
control devices which were (a) control of small employers 1 working hours 
and (b) indirectly, the limitation of production. 

Viewed in restrospect it does not seem logical that the question of 
possible illegality should have prevented effective administration and 
enforcement. Those who were charged with the administration of the 
Recovery Act realized that sooner or later the basic economic and social 
principles upon which the entire fabric of the I'TIBA was based would 
clash with the prevailing conceptions of legal realism and as a result 
face the test of supreme judicial scrutiny. The Advisory Council z 
stressed the question of legality wrien it urged a policy of caution and 
restraint in connection with administration of control clauses (*). 
Yet it is a fact that other clauses of equallyy doubtful legal validity 
were administered and enforced in serious fashion. The fact that the 
latter clauses were related to the field of fair trade and not labor 
practices may be construed as perhaps indicating a greater zeal on the 
part of industry than that manifested in connection with owner- ope rat or 
clauses. 

Possible trends of public reaction to owner-operator control un- 
doubtedly played an imoortant part in developing a cautious attitude 
on the part of the Administration. Cn the one hand, the attempt to 
ameliorate tiie conditions of workers was inextricably coupled with 
owner- ope rat or control and the Administration was peedged to this goal. 
Proponents of control devices frankly asserted they regarded many owner- 
onerator enterprises as economic growths' which' obtained nourishment 
only at th« expense of organized workmen and stabilized business condi- 
tions. They urged a policy of restriction for the common good. On the 
other hand, the Administration was faced with the necessity of estab- 
lishing and defining that uncertain line which separated reasonable 
restriction in the public interest i7 dth what some smight term oppres- 
sion of small enterprise. The Administration was also confronted with 
the fact that owner-operator control was part of a mere complex and 

(*) See Opinions of Advisory Council - Chapter II. 



9835 



-78- 

controversial question, namely; whether the public, through government, 
should encourage or restrict the many thousands of small establishments, 
most of v.-hich operated on a very narrow margin. In its broadest aspect, 
this question was associated with the basic problem of deciding between 
an industrial policy committed to laisee fairre ©r one in the direction 
of planned, control. 

In view of these facts it may be questioned whether the BRA, functioning 
as it did under an emergency charter, with a limited tenure of existence, 
should have added an additional charter of controversy to its kaleidoscopic 
history, by pursuing a "polic]^ of vigorous administration and enforcement of 
the control devices. Consequently, some will conclude that ERA was justi- 
fied in adhering to a plicy of indicision end caution. The writer, however, 
is inclined to take an opposite view. The owner operator control clauses 
represented integral parts of codes- As such these devices had the force 
of law and should have been vigorously administered and enforced. Until 
such time as factual data established the impracticability of the clauses, 
or their imcompatibility with the more general objectives of the Recovery 
program, a sincere effort should have been made to demonstrate that the 
provisions were effective. It should be borne in mind that the codified 
industries, where labor was sufficiently organized and potent to insure 
on its own accord compliance with cortrol provisions, were relatively few. 
In the majority of the 100 or more codes which contained owner operator 
control devices industrial and trade union machinery for effective en- 
forcement was entirely lacking. Government was' expected to chart an adminis- 
trative course and develop the proper machinery for compliance. If, there- 
fore, it may be assumed that the control provisions were disregarded and 
inoperative in the unorganized industries, IRA must accept a measure of 
responsibility for falling to effectuate the purposes of the control devices 
in these industries - .' 

At the very beginning of the codification period, it was incumbent upon 
those charged with administrative and erforcement responsibility to ex- 
plore with as much throughness as possible, the advantages and disac.vantp.ges 
of owner-operator control The results of such investigation would, have en- 
abled all those interested in the problem to determine the limit within 
which effective administration and enforcement could be undertaken. 

Had this been done, it would have been possible to establish a guide 
to policy for all industries confronted with the problem during the re- 
maining TEA days as well as to compile a source of invaluable information 
for the future, should this perplexing question again arise. 



9835 



-73- 



SUPPLEi EPT 



• • suggestions po p puptepp stjdy 

The survey entitled ,f The Ownor-Oper? tor Problem ; nd the 
national R e covery Administration" is b; no means; complete. In its 
present form the discussion merely Resents the nature of the problem 
and traces historically the efforts of interested trade, union and in- 
dustrial groups to attempt a partial solution through machinery and 
devices amde possible by the national Recovery Administration. 

It is obvious that the problem in its broadest aspect possesses 
ramifications which extend far beyond the limited na,lysis to which 
the Question was subjected as the result of ERA code controls. A 
discussion ba,sed on this wider perspective necessarily entails an 
entirely different approach and requires careful consideration of 
the factors involved in the position of small business enterprises 
in the modern economy. Such a discussion would involve an almost 
unlimited range of Kjnterial, quite apart from 8-11 ERA and related 
sources. It is, therefore, far beyond the scope of this assign- 
ment. However, even though the problem is viewed strictly from an 
ERA perspective a great deal of additional work is necessary before 
this survey can be considered satisfactory or thorough. As pre- 
viously pointed out, the' history of the control devices in operation 
should be depicted and a comprehensive evaluation of ERA experiences 
made. Possible sources of material on this phase of the inquiry are 
suggested in Chapter III. 

An investigation of trade union and trade association represent- 
atives end files, if undertaken, could profitably utilize some sort 
of a questionnaire, sufficiently broad in sco;"e to elicit information 
on most of the factors, associated with the owner operator problem and 
its consideration by ERA. A questionnaire of this type has been 
developed by the writer, and is atta.ch.ed hereto. It may guide any- 
one who wishes to pursue the further study of the problem. 

. This questionnaire covers the following subject matter: 

(a) Causes of owner-Operator competition. 

(b) Methods by which this type of competition is carried on. 

(c) Experiences in attempting to control owner-operators 
through "-"PA codes of fair competition. 

(d) Experience with public regulation affecting owner- 
operator s. 

(e) Industry and labor efforts to raise the levels of com- 
petition among owner-op erat o r s . 

It should be noted that the particular questionnaire is sufficiently 
flexible in character to permit whatever changes and modifications 
prove necessary. 



-80- 

SOME ISSUES TOITOUCPZJ IIT C0I T SIDE5 A TI0i' OF rEOBLEII 

In considering the general nature of the owner-operator com- 
-oetitive problem a number of questions and issues presented them- 
selves as ap'-'ro-oriate for discussion and analysis which the limitations 
of time and data .made it impossible -to consider. Several of these 
issues are presented herewith as questions for further study: 

(1) The Owner-Oner at or and the -problem of Unennloyrnent . 

(a) The small unit and ovmer-operator enterprise as 
answers to technolo^i cal unemployment. 

(b) Public relief expenditures as affected by the owner- 
operator. 

Uany persons contend that restriction of owner-operator is 
socially undesirable because it eliminates opportunities for individuals 
displaced by development of machinery as well as other causes to earn 
a. livelihood by engaging in this type of enterprise. It is also 
claimed that restrictive control of owner-operators result in addi- 
tional burdens upon public relief, especially during periods -of 
economic distress. 

(2) The relationship between owner-operator establishments and 

■; ■ ma rginal consumers - 

what about the marginal groups (white collar, etc.) whose low 
•earnings necessitate cheap services and goods provided by certain 
types of owner-operators? Even though some of these goods and 
services may be sub-standard, marginal workers cannot afford to pay 
more. The elimination 01" owner-operators, it is claimed, may seriously 
jeopardize this type of consumer. 

3. The -basic' question of whether production control, obtained 
through (l) limiting' hours of work for small omoloyers, (2) closing 
of shops, stnrps and on slants between specified hours and/or on 
specified days per reek and (3) limiting the use of machinery, re- 
quires considerable exploration and ana^sis, even though the dis- 
cussion be limited to the 1 T 3A program of control as regards owner- 
operators. A comprehensive treatment of this ■iroblem, ca.n be had 
only. with the -lossession of the necessary data showing the results of 
the LIRA. -)ro, ram. 



•81- 



Name of Trade Association (union) 

SCHEDULE 



Address 



PLEASE CHECK OK THE BASIS 01' YOUR KI7( '/LEDGE, OBSERVATION, STUDY AND EXPERI- 
ENCE: 

"Owner-operated establishements 1 ' are establishments operated solely by the 
owner or proprietor or by the proprietor with a few employees but in which 
the proprietor performs some duties similar to that of the employees. 

1. Does the competition offered by certain tjqpes of "owner-operated" 
establishments constitute a, problem in your industry? In what way? 



-~ Yes 



— No 



If answer is yes, kindly indicate by the use of an appropriate definitive 
or discrijtive word. or phrase the extent to which theproblem affects your 
group. Eor exavoe, is the competition. 



— Extensive 



— Limited 



— Unusual 

(in what manner) 



Indicate available statistics covering establishments conducted by owner- 
operation. 



Total Number of Establishments 

ii ii ii with no employees 

u ii ii ii one " 

II ii ii ii two " 

n it ii 'I three " 

ii n it ii four » 

it ii it ii five I' 



Total Number of employees in Industry 



If you have a breakdown on the estimated total number of units in the 
industry, estimated total number of owner-operator establishments and 
estimated total number of employees, State by State, kindly submit such 
data. 



Does this problem in your industry manifest itself in all sections of 
the country to an equal degree or is it centralized in various geographic 
localities? Explain. 



9335 



-82- 



Is the problem particularly acute in certain metropolitan areas? 
list the most important cities. 



If so, 



II 

The following are suggested as probable or possible causes or basis of 
competition of owner-operators with other memoers of the industry. Chech 
those pertinent and number in order of import ance: 



- Use of obsolete, cheap or deficient 
Equipment and materials 

-Installment buying of equipment 

- Obsolete methods and standards 

- Personal relationships 

- Unrestricted working hou.s 
• Seven clay working week 

■ Inadequate safety & health laws 

■ Inadequate inspection on basis of 

existing laws 



— Sacrificing capital investment 



— Low overhead. 

— Combination of home & shop 

— Homework 

— Employment of family 

— Lack of safety appliances 
Lack of. Incur rnce_: 

— Accident Liability • 

— 'brkmen' s compensation 



(A general paragraph or two giving some detailed information on items checked 
will be helnful) 



III 

Is competition maintained b;r owner-operator or \>ir any of" the following 
methods? Check those believed applicable -and number in' order' 1 of importance: 



Free service 

Combination of services for less than 

specified price of each service 
Special services 

Unethical solicitation of business 
Type of credit extended 
Accepting work from outside salesmen 

on commission basis only 
Unfair discounts 
Rental of part of premises to other 

one-man operators 
False billing 

False labelling or marking 
non-listing of prices 
non display of prices 



— Use "of prices, -oremiums, 

lotteries 

— Selling below cost 
Imitation . of^ c ompetitor 1 a 

— Product 

— irade : Karnes 

— Slogans 

— Color Schemes 

— Adulteration (including 

dilution or substitution) 
Lij|r epr esentat ion in advert i s in/ 
as to — Quality 

— Price 

— Guarantee 



(A general paragraph or two giving some detailed information on items checked 
will be helpful) . 



9835 



IV 

Hhat methods of control provided by Codes of Fair Competition have 
"been found most effective in met. ting the problem of owner-operator com- 
petitions? 



— Registration 

— Di spiny of conroliance insignia 

— Certificates of compliance 

— Publication of registration number 

— Publicizing non-compliance 

— Minimum prices 

— Minimum standards of Quality 

— Posting notices of insurance 

insurance 

— Prohibiting sales of services and 

materials to violators 

— Regulating shop opening & closing hours 

— Regulating hours of employers and members 

of Industry 

— Regulating compensation of en-oloyers snd 

mo,, hers of industry 

(A general paragraph or t'" r o giving some detailed! information on items check- 
ed will be helpful). Particular emphasis should be placed upon the degree 
of voluntary compliance with code provisions:.- and expedience with Code en- 
forcement methods. 



Keeping books and records 
Piling -jriee lists 
Requiring insurance 
Inn ection of records 
Liquidated damages 
Prohibition against purchase 

of non-labelled goods 
Curtailing and eliminating 

homework 
Establishing market or labor 

areas 



"./hat methods of public regulation included in this group have been 
successfully employed in your area to regal rte competition of one-man 
operators in your industry or trades? 



— Municipal licensing 

STATE OR MUNICIPAL LEGISLATION COVERING: 



Zoning regulations 



— employment of members of family 

-~- employment of individuals engaged in more 
than one occupation 

— insurance requirements 

— accident compensation 

— safety and health 

— inspection 

— filing of reports 

— emergency laws based on public interest, 

necessity and convenience 



— minimum requirements to 

engage in trade or voca- 
tion 

— examinations to determine 

proficiency 

— night work 

— working hours per day 

— working days per week 

— opening and closing hours 



.(A general paragraph or t"o giving some detailed information on items check 
ed will be helpful). 



9835 



-84- . 

1 

What methods have "been used to educate and control those engaged in 
this tyoe of competition? (exclusive of Code controls and legislation) 

— Price e tabilization agreements — Hestircting sales below 

— Labor area agreements costs 

— Improved credit facilitie- & credit — Adoption of minimum quality 

control standards 

— Study of individual mortality — Buying up second hand equip- 

statistics (physical) ment 

— Study of "business mortality statistics 

(A general paragraph or two giving some detailed information, on items 
checked will be helpful). 



Have efforts "been nr.de to raise the levels of competition among owner- 
operators through 

— Trade associations — Better Business. Bureaus 

— Trade unions — Chambers of Commerce 

— Cooperatives (purchasing) — Other Civic Or ganizations such as 



Plea ; e indicate what degree of success was obtained through such efforts, 



If unsuccessful in efforts to raise levels of competition, state why 
and give chief reasons for failure? 



In addition to information furnished abve, what general remarks, crit- 
icisms, and conclusions can you make with reference to the problem of the 
owner-operator in your industr; insofar as it affected or affects labor 
standards and industrial stability prior to the Code period; and during the 
KHA and what recommendations can you submit with respect to any possible 
future legislative or industrial activities in this regard? 



9835 



-85- 
APPENDIX A. 

S ELECTED SERVICE TBABES 

Table 1. Distribution of Establishments by Proprietors and Employees, 1933. 

Table 2. Distribution of Establishments by volume of receipts in 1933. 

Table 3. Distribution of Total Receipts and TJages, 1933. 

Table 4. Increase in establishments— 1929-1933. 

TABLE I 

SELECTED SERVICE TRADES 

DISTRIBUTION OP ESTABLISHMENTS BY PROPRIETORS AND EMPLOYEES, 1933 

INDUSTRY .._; ■ ' :■ Proprietors 





. No. of 
establish- 
ments 


No. of 
proprie- 
tors. 


Proprietor 

per estab- 

li shment 


BARBERSHOP 
CL-llNING-'; PRES- 
SING? ETC. 


117,832 
55,459 


12S,709 
59,965 




1.09 
1.08 


SHOE REBUILDING 


50.425 


52, 781 




1.59 


BEAUTY SHOPS 


42,073 


45,807 




1.09 



SOURCE: Volume I, Services, Amusements & Hotels - Census of American 
Business, 1933, U. S. Lept. of Commerce, .Hay, 1935. 

TABLE I :( Continued) 

S ELECTED S ERVICE TRADES 

DISTRIBUTION OP ESTABLISHMENTS BY PROPRIETORS AND; EMPLOYEES, 1933 

Em ploye es 



No. of 
establish- 
ments 



Average no, 
of fulltime 
employee s 



Average full- Average no. Average part 
time employees of part time time employees 
per est abli shment employees ~per establishment 



117,832 

: 55, 459 

5(3,425 

42,073 



71,347 


.61 


28.274 


.51 


12,875 


.26 


42,735 


1.02 



18.123 

12,086 

4,739 

8,955 



.15 
.22 
.09 
.21 



9835 



-86- 



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9S35 



APPENDIX B. 



COMMERCIAL TRUCKING INDUSTRY 



Table 5. Percentage of total "for hire" trucking establishments regis- 
tered by one r vehicle (owner-operator) enterprises 
in five western states. 

Table 6. Percentage of total "for hire" trucking establishments regis- 
tered by one- vehicle (owner-operator' 1 enterprises 
in five eastern states. 



table 5 



Commercial Trucking Industry 

Percentage of Total ."For-Hire" Trucking Establishments 
Registered by one-vehicle ( Owner-Operator) Enterprises 
in Five Western States. 



(l>Wfo - T otal for each group') 



TYPE OP CARRIER 

Common Carrier 
Commodity Carrier 
Contract Carrier 
Anywhere for Hire 

Local Cartage 

Mixed Type 



PERCENTAGE OF TOTAL 



85. 


72 


9-'\ 


91 


84 


40 


88 


53 


85 


77 


59 


96 



All for Hire 



85.231 or 19, 740 enterprises. 



SOURCE: 



Record of Code Authority Registrations for States of 
Minnesota, Missouri, Iowa, Nebraska and Kansas. 
Trucking Code History - Appendix. 



983f 



-9C- 

TABL3 6 

Commercial Trucking Industry 

Percentage of Total "For Hire" Trucking Establishments 
Registered by one-vehicle ( Owner-Operator) Enterprises 
in five E aste rn Sta tes. 

(100^ g Tot al for each group) 



TYPE O F CARRIER 

Common Carrier 
Commodity Carrier 
Contract Carrier 

Anywhere for Hire 
Local Cartage 
Mixed Type 



PERCENTAGE OE TOTAL 



79. 


69 


84. 


.02 


78. 


,18 


87, 


,99 


83, 


,62 


54, 


67 



All for Hire 



80.31 or 43,397 Enterprises. 



SOURCE: 



Record of Code Authority Registrations, for 
States of Hew York, New Jersey, Pennsylvania, 
Ohio and Michigan. Trucking Code History - 
Appendix. 



9835 



-91- 
APPEITOIX C 

RETAIL TRADE INDUSTRY 



Table 7. A comparison of Independent Retail Establishments with five 
or less employees with all other retail stores. 



Table 8. Classification of Independent retail enterprises, showing 
ratio of establishments with five or less employees (in- 
cluding proprietor) to totals. 



Table 9. Major divisions in retail trade which average less than 
five employees per establishment - — for the year 1929. 



Table 10. Distribution of retail establishments by dollar volume. 



9835 



-92- 

TABLE VII 

Retail Trade Industry . . 

A Comparison of Independent Retail Establishments 

with 
Five or Less Employees with all Other Retail Stores 



Independents 

with five or 

TOTAL less employes 

(including 

proprietors) 



Independents 

with more than 

five employees 

( including 

proprietors) 



All 

Chain 

Stores* 



Stores 1,526,119 
(lOOg) 



Proprietors 



1,574,341 



Full-time 

employes 2,703,325 



1,287,438 
(84.4jS) 



1,490,183 
(94. 7/0 ) 



833,310 
(30.8,0 



97,078 



60,288 



1,184,808 



141,603 



3,670 



685,207 



* Local, sectional, national and manufactures — controlled chains. 
These figures do not include central-office employees of chains, 
which would add the following: 

Central-office executives 6,183 

Central-office full-time employes 103, 895 

Central-office part-time employes (average number).... 3,346 

SOURCE OF I NFORMAT I ON : 



Code History, Retail Trade . 
computation as follows: 



Based on special tabulations. Basis for 



"The number of stores indie: ted as having five or less employees 
is based upon the proportions established by a tabulation of all inde- 
pendent store schedules from the 10 States of Arkansas, California, 
Georgia, Massachusetts, Missouri, Nebraska, New Jersey, North Carolina, 
Ohio and Oregon, aggregating 444,614 stores constituting 29.1 per cent 
of the 1,526,119 stores in the United States in 1933. To reduce the 
cost of tabulation, all independent stores with sales of less than $20,000 
were assumed to have five or less employees and included in bulk. All 
stores with sales of more than $50,000 were assumed to have more than 
five employees (including proprietor) and were excluded in bulk. The 
tabulation cards representing all independent stores with sales be- 
tween $20,000 and $50,000 were sorted on number of employees, using 
50 man-months of full-time employment as the basis of segregating. All 



9835 



-93- 

the independent stores with less than 50 man-months of full-time employ- 
ment mere considered to have four or less full-time employees, or five 
including proprietor; all independent stores with 50 or more man-months 
of full-time employment were considered to have more than five full- 
time employees, including proprietor. The man-months of employment 
used in this connection do not represent the services of the proprietor. 

All cards showing less than 50 man-months of full-time employ- 
ment were tabulated by kinds of business to show the number of stores, 
number of proprietors and the number of full-time employees. These 
totals were added to the known total of those independent stores with 
sales volume of less than $20,000. 

The ratios established "by this tabulation, for the 10 representa- 
tive states, were applied to the United States totals, classification 
by classification, to arrive at the projected totals shown above. The 
result was an indicated total of 1,287,438 independent stores with five 
or less employees. 

Of the remaining 238,681 stores, representing independents with 
more than five employees and all chain stores regardless of the number 
of employees, the chain store was determined by the summary of chains 
contained in Table III, volume 6 of the Retail Census reports for 1933. 
The remaining stores were regarded as independents with more than five 
employees, including proprietors. Ho tabulation was made of part-time 
employees on a comparable basis." 



9835 



-94- 

TABLE VIII 

Retail Trade Industry 

classific/tion of independent retail ENTERPRISES, SHOWING RATIO 
OF ESTABLISHMENTS T/ITH FIVE OR LESS EMPLOYEES (INCLUDING PROPRIETOR) 

TO TOTALS 
(According to kinds of business) 

Kind of Business 100;£ = Total 

Candy and Confectionery stores 97.0 

Delicatessen stores 93.9 

Fruit stores and vegetable markets 95.2 

Meat markets 90.5 

Bottled "beer and liquor stores 96.2 

Country-general stores 94.4 

Custom Tailors 94.2 

Motor vehicle and supply dealers 95.3 

Garages and repair shops 96.8 

Other automotive dealers 91.0 

Radio stores" 90.8 

Electrical shops 92.0 

Heating and Plumbing shops 90.3 

Hardware stores 91.3 

Restaurants 91.7 

Lunch counters 94.9 

Drinking places 99.2 

Cigar stores and stands 90.3 

Florist shops 95.3 

Jewelry stores 92.7 

Second-hand stores 95.8 

The 10 classifications showing the smallest ratio of small inde- 
pendent stores with no more than 5 persons actively engaged, including 
proprietors are: 

Department stores (none) 

Variety stores 53.5 

Motor vehicle dealers 55.8 

Lumber and building material dealers 59.6 

Office and Store supply and equipment 60.8 

Shoe stores 70.9 

Newsdealers 71.7 

Household appliance stores 72.6 

Furniture stores 75.9 

Filing stations 76.1 



SOURCE: RETAIL CODE HISTORY — Based on Census of Distribution special 
tabulation. 

Note ; A number of types of enterprises included above in retail category 
classified as service and food establishments under Code classi- 
fications. 



9835 



-95- 

TABLE IX 

Retail Trade Industry 

MAJOR DIVISIONS-'lN RETAIL TRADE WHICH AVERAGE LESS THAN 
FIVE EMPLOYEES PER ESTABLISHMENT 
FOR THE 
YEAR 1929. 





No. 


Average 








Division 


of 


No. 


F.T. 




Annual 




Stores 


Employees 


Employees 




Sales 


Specialty Stores 


78,753 


3.3 


257,161 


$3. 


,269,015,672 


Hardware and Farm 












Equipment 


37,572 


2.0 


73 , 742 


1, 


,224,520,662 


Jewelry store 












Divisions 


19,998 


1.9 


38,273 




536,280,697 


General & Dry Goods 












Stores 


126,765 


1.2 


156, 561 


3 


,212,139,002 


Shoe Store Division 


24 , 259 


2.1 


48,516 




614,640,960 


Tire, Battery. & 












Accessories 


22,313 


2.3 


50,886 




599,295,161 


Household Appliance 












& Fixt. 


44,857 


3.3 


148,032 


1 


,205,383,537 


Booksellers 


2,800 


4.4 


12,465 




117,020,599 


Music Dealers Division 6,486 


4.0 


25,732 




279,220,564 


Florists 


9,328 


2.5 


22,964 




176,200,880 


Optical shops 


3,001 


1.7 


5,014 




49,999,873 


Surgical Instruments 


574 


4.9 


2,827 




31,865,121 



SOURCE; Retail Code History 
Tabulation. 



— Based on Census of Distribution Special 



9835 



-96- 

TABLE X 

Retail Trade Industry 
DISTRIBUTION OE RETAIL ESTABLISHMENTS BY DOLLAR VOLUME 

Retailers Number 

A. $500,000 and over 41,152 

B. 200,0' to $500,000 35,048 
C 75,000 to $200,000 54,421 

D. . 35,000 to $75,000 80,888 

E. 20,000 -to $35,000 72,856 
E. 10,000 to $20,000 123,782 
G. 5,000 to $10,000 159,962 
.H, 3,000 to $5,000 147,873 
I. 2,000 to $3,000 112,976' 
J. 1,000 to $2,000 .125,041 
K. 500 to $1,000 . . 125,500 . 
L. Less than $500 ,.. 429,121 



SOURCE: Exhibit submitted "by A. D. Whiteside, Division Administrator, 
in connection with report forewarded to the Administrator 
of the N.R.A. "Outstanding Impressions drawn from the Gen- 
eral Retail and : Retail Drug Trade Hearings, September 14, 
1933. 



9835 



-97- 

APPEIDIX D. 

SELECTED POOD INDUSTRIES 

Table 11. 'age earners, salaried officers and employees .in establish- 
ments with five or fewer employees (1933). 

Table 12. Establishments of five or fewer employees - by wage earners 
and weekly e Jrnings (1933) Selected States. 

T5EBLE.J11 '. 

SELECTED FOOD INDUSTRIES 



wage Earner?,, Salaried Officers and Employees in 
establishments with five or fewer employees- (1933) 



INDUSTRY 



Size of es- 
tablishment 



Number of 
establishments 



• Salaried 
officers & 
Employees 



Average 

total no. 

of wage 

earners 



Beverages 










Hon- Alcoholic 


Total 


2,903 


3,374 


15,123 




wage earners 


105 


19 







' 1-5 " »■ 


2,100 


1,416 


5,411 


Ice 


Total 


3,329 


5,620 


21,332 




wage earners 


— 


— 


— 




1-5 n u 


2,218 


2,313 


6,436 


Baking & other 


Total 


14,483 


14, 149 


155,229 


baking products 


wage earners 


453 


' 13" 


— 


(Except bis- 


1-5 " » 


9,325 


2,052. 


24,859 


cuits & crackers 










Confectionery 


Total 


1,218 


5,382 


50,609 




wage earners 


10 


.2 ' 


. — 




1-5 » " 


462 


366 


1,326 



SOURCE: Special Tabulation? from Census of Manufacturers - 1933 



9835 



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-99- 

APPENDIX E. 

GR APHIC ARTS INDUSTRIES 



Table 13. Wage earners, salaried officers and employees in establish- 
ments with five or fewer employees (1932), 



Table 14. Establishments of five or fewer employees - by wage earners 
and weekly earnings (1933) Selected States. 



TABLE 13 
GRAPHIC ARTS INDUSTRIES 



INDUSTRY 



Wage earners. Salaried officers and Employees in 1933 
Establishments with five or fewer employees 1933 



: Salaried 
Size of es-: Number of : officers & 
tablishment : establishments employees 

:4 



Average 
; total no. 
of wage 
earners 



Print & Pub. 

Book Pub. & Print. Total . 73 

0-20 wage earners (*) 43 

Print. & Pub. : Total 8,383 

Job Printing - wage earners 301 

: 1-5 " » 4,942 



1,663 
430 



19,574 

61 

2,899 



4,387 
285 

95,744 
13,392 



(*) No breakdown available 



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-101- 

iPPEITDIX P. 
SELECTED i/iMrJFACTUimTG- IEDUSTPJSS 



Table 15. Wage earners, salaried officers and crmloyces in 

establishments with five or fewer employees (1933). 

Table 1C. Establishments of five or fewer employees - by wage 
earners and weekly earnings (1933) Selected States. 



TABLE 15 
SELECTED IvIAHDTACTUPJFG I1DUSTEIES 



Uage Earners, salaried officers and employees in Establishments 
with five or fewer employees - 1953. 









Sale r ied : Avera.ge 




Size of es- 


Eumber of 


officers <1: total no. 


IITDU3TEY 


tablishment 


e s tabl i shnent s 


eimloyees :of wage 
: ea,rners 



Jewelr;/ 



Eur 



Toys 



Embroideries 
Schiffili 



Total 


779 


3,405 


13,059 


-5 wage earners 


410 


415 


1,066 


Total 1 


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1 , 573 


8,310 


wa ;e earners 


43 


30 


— 


1-5 » " 


964 


466 


3,413 


Total 


385 


1,390 


13,484 


0-5 wage ea.rners 


78 


93 


337 


Total 


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138 


1,959 


wage earners 


1) 


- 


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168) 


33 


458 



S0U2CI 



Special Tabulations from Census of Lanufactures, 1933 



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■103- 



APPENDIX G 



BUILDING CONSTRUCTION INDUSTRIES 



Table 17. Tabulation of Trade Association information: 
San Francisco county - Nine nrincroal 
specialty contracting industries. 

Table 18. Establishments of five or fewer employees - 
by wage earners and weekly earnings (1933) 
Selected states. 



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TlC 5- 

» CQM'"IE'. T T: SPECIALTY CONTRACTS INDUSTRIES 

Electrical Contracting: ^ c distribution i s very consistent throughout the 
state, registrations ner 10,0°0 -oo-ml'ation "being: 

¥ o'. California . 2.35 
■ ■■; So. .California 2.17 ■ 

State of California • ' 2.25 

The radio "business is a. .sustaining activity of most small firms. This 
and the dvnesl of the 'scientific nature of the "business -undoubtedly causes it 
to attract npn: high school .graduates, .and makes' for the crowded condition of 
this industry as comparer' with, most /other specialty" contracting l ines « Tile 
need of advertising and the Mgh average intelligence of those in the industry 
also makes for a high percentage of telephone listings. 

The tele-v: one listings of .electrical contracting firms indicate the nro*. 
nortion of those eauinned to do .jobs of a, substantial size, and are more in 
line wit:.-, the numbers in other specialty contracting branches. These are: 

No. California 0.46 

So. California 0.18 ' 

State of California 0.29 

Keating r nd. Pining; "Registrations -oer 10,000 show the influence of the 
warmer climate general in Southern California.. . ... • 

No. California • 0,69 

.So. California 0.34 

State of California 0.47 

This industry, as well as Mason and Plastering Contracting, has -orin- 
croal contact with general contractors to whom they are known, rather- than to 
the general public- This explains the relatively low nroudrtion of telephone 
listings in these groups. ." '.''". 



Mason Cont ract ing: The. registrations in the "inohts try in Northern California 
are nearly 30 £ 1 higher -ner caoita. than in the South.- This is accounted for by 
the earlier development of the North, which took nla.ee vr^en brick-worn was 
common and reinforced . concrete was . unknown. T: is industry -oers is ts a.s a 
tradition t/ough it is fighting a losing battle with Concrete. The small 
number of brick-masons, .the long -oeriod of an-orenticeshit) required and their 
ma.intenr.nce of high wage, rates, as against the high nrouortion of common labor 
utilize"'' in the r>roductiai of c oncrete .work aggravates, this industry. 

Pai nting an'" Decor ating: The ease w ith which journeymen in this trade can 
go into business for themselves, the numerous "clean-uu" canroaigns and the 
Federal Housing Administration's work with the conseciuent great number of 
small jobs causes this to show the greatest registration of all specialty 
contractin- ind/ustries. The greater number of Northern Counties and. the 

9835 



-106- 

"home industry" sentiment explain" the "considerably larger (47$) proportion 
of registration there. Direct contact with the public is indicated by the 
high proportion of telephone listings in this as well as in the Flumbing 
Contracting Industry. 

Flastering and Lathing : The distribution of this industry is almost uni- 
form throughout the larger counties. 

Flumbing Contracting ; The smaller proportion of registration in the North 
(83$ of South) is caused by the early establishment of strict licensing and 
municipal supervision in the older cities of Alameda, Fresno, Sacramento and 
San Francisco counties, together with the early establishment of powerful 
trade associations. 

Roofing and Sheet Metal : The distribution of this industry is almost exactly 
uniform throughout the state. This is probably the result of close watch 
on this business exercised by roofing material manufacturers. Contact with 
the public, large number of repair jobs and the F.H.A. campaign account for 
the high proportion of telephone listings. 

Tile Contracting : The number of members of this industry is undoubtedly held 
down by an active and restrictive trade association, and the close cooperation 
of tile manufacturers therewith. The 40$ higher relative registration in the 
South is -caused by the enormously greater proportion of residence construction 
there since 1920 and by the popularity of the Mediterranean styles of archi- 
tecture there. 



TRADE ASSOCIATIONS : Data is presented for San Francisco County only (see 
page 11-A). This is the oldest large city and the most highly developed in 
the state. Therefore the development of associations found here will not be 
equalled in other communities. 

It may be said that in the Electrical, Mason, Flumbing and Tile Contract- 
ing Industries only do the trade associations show adequate representation. 

Electrical Contracting has a most active organization, which has made 
strenuous efforts to raise prices to a level that will support almost the 
same number of concerns that existed in 1929. Their mechanics have not been 
taken care of to the same extent, it being impossible with the reduced volume 
of available work. la March, 1935 the secretary of the Association reported 
that available volume of work was only 26$ of that in 1929. Unit prices were 
nearly doubled. 

Mason Contracting : The strongly organized character of the labor in this 
industry is necessarily reflected in the employing group. For many years 
wage agreements have been entered into and adhered to. Brick manufacturers 
strongly encourage the maintenance of the . trade association, cooperating in an 
endeavor to promote the use of this material. 



9835 



-107- ' 

Plumbing; Contracting ; The registrations in this industry in San Francisco 
have remained stationery for the -past year, by contrast with considerable 
increases in other lines. The 50-year old trade association and close 
supervision and strict licensing by the Department of Health explain this 
situation. : 

Tile Contracting ; This industry has a very powerful trade association, as 
referred to above. It is monopolistic in tendency and constantly endeavors 
to maintain fairly high prices. - 



9835 



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-109- 

APPEIUjIX H . 
(Citation of Police Power of State) 



Francis Barrier, Pltff. in Error 

V. 
Patrick Connolly (113 U. S. 27) 

City Ordinance - validity of - power of federal tribunal - 
police power of State. 



FRANCIS BARBIER, Plff. in Err., 

v. 

PATRICK CONNOLLY, 

(113 U.S. 27) 

(See S. C. , Reporter's ed. , 27-32.) 

City ordinance - validity of - power of federal tribunal - police power 
of State. 

1. The ordinance of the City and County of San Francisco, prohibit- 
ing the carrying on of public laundries and wash houses within certain 
prescribed limits of the city and county, from ten o'clock at night until 
six o'clock in the morning, is purely a police regulation within the com- 
petenc3' - of any municipality, possessed of the ordinary powers, to make. 

2. A federal tribunal cannot supervise such regulations; any cor- 
rection of the action of municipal bodies in such matters can come only 
from state legislation or state tribunals. 

3. The 14th Amendment of the U. S. Constitution is not designed to 
interfere with the power of the State, sometimes termed its "police power," 
to prescribe regulations to promote the health, peace, morals, education 
and good order of the people 

(No. 871) 
Submitted Nov. 25, 1384. Decided Jan. 5, 1885. 

In Error to the Superior Court of the City and County of San Francisco, 
State of California. 

The history and facts appear in the following: 

Statement of the case by Mr. Justice Field: 

On the 8th of April, 1884, The Board of Supervisors of the City and 
County of San Francisco, the legislative authority of that municipality, 
passed an ordinance reciting that the indiscriminate establishment of 
public laundries and wash houses, where clothes and other articles were 
cleansed for hire, endangered the public health and the public safety, 

9835 



- lie- 



prejudiced the well "being and comfort of the community and depreciated 
the value of property in their neighborhood; and then ordaining, pur- 
suant to authority alleged to "be vested in the Board under provisions of 
the State Constitution and of the Act of April 19, 1856, consolidating 
the government of the city and county, that after its passage it should 
"be unlawful for any person to establish," maintain or carry on the "bus- 
iness of a public laundry or of a public wash house within certain 
designated limits of the city and county, without first having obtained 
a certificate, signed by the health officer of the municipality, that 
the premises were properly and sufficiently drained, and that all proper 
arrangements were made to carry on the business without injury to the 
sanitary condition of the neighborhood; also a certificate, signed by 
the board of fire wardens of the municipality, that the stoves, washing 
and drying apparatus and the appliances for heating smoothing irons, 
were in good condition and that their use was not dangerous to the sur- 
rounding property from fire, and that all proper precautions were taken 
to comply with the provisions of the ordinance defining the fire limits 
of the city and county, and making regulations concerning the erection 
and use of buildings therein. 

The ordinance requires the health officer and board of fire wardens, 
upon application of anyone to open or conduct the business of a public 
laundry, to inspect the premises in which it is proposed to carry on the 
business, in order to ascertain whether they are provided with proper 
drainage and sanitary appliances and whether the provisions of the fire 
ordinance have complied with; and, if found satisfactory, in all respects s 
to issue to the applicant the required certificates without charge for 
the services rendered,, Its 4th section declares that no person owning or 
employed in a public laundry or a public wash house within the prescribed 
limits shall wash or iron clothes between the hours of ten in the even- 
ing or six in the morning or upon any portion of Sunday; and its 5th sec- 
tion, that no person engaged in the laundry business within those limits 
shall permit anyone suffering from an infectious or contagious disease 
to lodge, sleep or remain upon the premises. The violation of any of these 
several provisions is declared to be a misdemeanor, and penalties are pre- 
scribed differing in degree according to the nature of the offense. The 
establishing, maintaining cr carrying on the business, without obtaining 
the certificates, is -punishable by fine of not more than $1,000, or by 
imprisonment of not more than six months, or by both. Carrying on the 
business outside of the hours prescribed, or permitting persons with con- 
tagious diseases on the premises, is punishable by fine of not less than 
$5 or more than $50, or by imprisonment of not more than one month, or by 
both such fine and imprisonment. 

The petitioner in the court below, the plaintiff in error here, was 
convicted in the Police Judge's Court of the City and County of San Fran- 
cisco, under the 4th section of the ordinance, of washing and ironing 
clothes in a public laundry, within the prescribed limits, between the 
hours of ten o'clock in the evening of May 1, 1S84, and six o'clock in 
the morning of the following day, and was sentenced to imprisonment in 
the county jail for five days, and was accordingly committed, in execution 
of the sentence, to the custody of the city and county, who was keeper 
of the county jail. That court had jurisdiction to try him for the 

9835 



-Ill- 
alleged offense, if the ordinance was valid and binding. But, alleging 
that his arrest and imprisonment were illegal, he obtained from the 
Superior Court of the city and county a writ of habaes corpus, in obedi- 
ence to which his body was brought before the court by the sheriff, who 
returned th?t he was held under the commitment of the police Judge upon 
a conviction of a misdemeanor, the commitment and sentence being produced. 

The petitioner thereupon moved for his discharge, on the ground 
that the 4th section of the ordinance violates the 14th Amendment to the 
Constitution of the United States, and certain sections of the Constitu- 
tion of the State. The particulars stated in which such alleged violations 
consist were substantially these, omitting the repetition of the same pos- 
ition: that the section discriminates between the class of laborers en- 
gaged in the laundry business and those engaged in other kinds of business; 
that it discriminates between laborers beyond the designated limits and 
those within them; that it deprives the petitioner of the right to labor 
and, as a necessary consequence, of the right to acquire property; that 
it is not within the power of the Board of Supervisors of the City and 
County of San Francisco; and that it is unreasonable in its requirements. 
The Superior Court overruled the positions and dismissed the writ, and 
the petitioner brought this writ of error. 

Mr. A. C. Searle, for plaintiff in error. 

Ilessrs.'H. G. Sieberst and Alfred Clarke, for defendant in error. 

Mr. Justice Field delivered the opinion of the court : 

In this case we can only consider whether the 4th section of the 
ordinance of the City and County of San Francisco is in conflict with the 
Constitution or laws of the United States. We cannot pass upon the con- 
formity of that section with the requirements of the Constitution of the 
State. Our jurisdiction is confined to a consideration of the federal 
question involved, which arises upon an alleged conflict of the 4th sec- 
tion in question with the 1st section of the 14th Amendment of the Constitu- 
tion of the United States. No other part of the Amendment has any possible 
application. 

That 4th section, so far as it is involved in the case before the 
police Judge, was simply a prohibition to carry on the washing and ironing 
of clothes in public laundries and wash houses, within certain prescribed 
limits of the city and county, from ten o'clock at night until six o'clock 
on the morning of the' following day. The prohibition against labor on 
Sunday is not involved. The provision is purely a police regulation within 
the competency of any municipality possessed of the ordinary powers belong- 
ing to such bodies. And it would be an extraordinary usurpation of the 
authority of a municipality if a federal tribunal should undertake to sup- 
ervise such regulations. It may be a necessary measure of precaution in 
a city composed largely of wooden buildings like San Francisco, that 
occupations, in which fires are constantly required, should cease after 
certain hours at night until the following morning; and of the necessity 
of such regulations the municipal bodies are the exclusive judges; at least 
any correction of their action in such matters can come only from state 
legislation or state tribunals. 

9835 



-112- 

The same municipal authority which directs the cessation of labor 
must necessarily prescribe the limits within which it shall be enforced, 
as it does the limits in a city within which wooden "buildings cannot be 
constructed. There is no invidious discrimination against anyone within 
the prescribed limits by such regulations. There is none in the regula- 
tion under consideration. The specification of the limits within which 
the business cannot be carried on without the certificates of the health 
officer and board of fire wardens is merely a designation of the portion 
of the city in which the precautionary measures against fire and to se- 
cure proper drainage must be taken for the public health and safety. It 
is not legislation discriminating against any one. All persons engaged 
in the same business within it are treated alike; are' subject to the sane 
restrictions and are entitled to the same privileges under similar con- ' 
ditions. 

The 14th Amendment, in declaring that no State "Shall deprive any 
person of life, liberty or r>ror>erty without due process of law, nor deny 
to any person within its jurisdiction the equal protection of the laws," 
undoubtedly intended, not only that there should be no arbitrary depriva- 
tion of life or liberty or arbitrary spcilation of property but that 
equal protection and security should be given to all under like circum- 
stances in the enjoyment of their personal' and civil rights; that all 
persons should be equally entitled to pursue their hapniness and acquire 
and enjoy property; that they should have like access to the courts of 
the country for the protection of their persons and property, the pre- 
vention and redress of wrongs, and the enforcement of contracts ;, that no 
impediment should be interposed to the nursuits of anyone except as ap- 
plied to the same pursuits by others under like circumstances; that no 
grea.ter burdens should be laid upon one than are laid upon others in the 
same calling and condition, and that in the administration of criminal 
justice no different or higher -punishment should be imposed uoon one 
that such as is nrescribed to all for like offenses. But neither the 
Amendment, broad and comprehensive as it is, nor any other amendment was 
designed to interfere with the power of the State, sometimes termed its 
"police "cower, " to nrescribe regulations to promote the health, peace, 
morals, education and good order of the people, and to legislate so as 
to increase the industries of the State, develop its resources and add 
to its wealth and -orosperity. From the very necessities of society, 
legislation of a special character, having these objects in view, must 
often be had in certain districts, such as for draining marshes and ir- 
rigating arid plains. Special burdens are often necessary for general 
benefits, for supplying water, .preventing fires, lighting districts, 
cleaning streets, opening parks, and many other objects. Regulations 
for these purposes may press with more or less weight upon one than upon 
another, but they are designed, not to inroose unequal or unnecessary 
restrictions upon anyone, but to promote, with as little individual in- 
convenience as possible, the general good. Though, in many respects, 
necessarily special in their character, they do not furnish just ground 
of conrolaint if they operate alike upon all persons and property under 
the same circumstances and conditions. Class legislation, discriminat- 
ing against some and favoring others, is prohibited; but legislation 
which, in carrying out a nublic purpose, is limited in its application, 
if within the sphere of its operation it affects • alike all persons simi- 
larly situated, is not within the Amendment. 

9835 



■li;- 



In the execution of admitted powers unnecessary proceedings are 
often required which are cumbersome, dilatory and expensive, yet, if no 
discrimination against anyone be made and no substantial right be im- 
paired by them, they are not obnoxious to any constitutional objection. 
The inconveniences arising in the administration of the laws from this 
cause are matters entirely for the consideration of the State; they con 
be remedied only by the State. In the case before us, the provisions 
requiring certificates from the health officer and the board of fire 
wa.rdens uscj, in some instances, be unnecessary, and the changes to be 
made to meet the conditions prescribed may be burdensome, but as we 
have said, this is a matter for the determination of the municipal it;; - 
in the execution of its police powers, and not a violation of any sub- 
stantial right of the individual. 



Judgment affirmed. 



9835 



-114- 



APPENDIX I. 
TABULATION OF OTOTER-OPERATOR CODE CONTROL DEVICES 



Listing rf N. E. A. Cede control clauses affecting 
maximum hours of owner — operators. 

Listing of IT. R. A. Code control clauses affecting 
compensation of owner — operators. 



9635 



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A F?jSSBIX J. 

N. R. A. LilOAI HLSEAhCH ■ ^ilQHAI'TU i #175 



liemorp nduin of L?w concerning hours of lpbor restrictions 
upon individual entrepreneur. 



9835 



-121- 



L^EbiOBAITDUM OF LAW CONCERNING- HOUr-.S OF LABOB RESTRICTIONS 
■ UFON INDIVIDUAL UNTEEFFJiNMJE 



#175 

N.R.A. 

Leg-"1 Reserrch 

August 18, 1934 



y6bf 



-122- 

Saturripy, 

N.R.A. August 18, 1935 

Legal Research 

MEMORANDUM Q> LA 1 " CONCERNING- HOURS OR LABOR RESTRICTIONS 

UFON INDIVIDUAL ENTERFRENEUR 



Statement of Facts 



A code of fair competition says th- t the hours of labor pro- 
visions apply to members of the industry who do their own. work w i th- 
ou t the assistance of employees.. 

The first part of the second paragraph of Section 5 of the 
National Industrial Recovery Act is as follows: 

"Nothing in this Act, pnd no regulation 
thereunder, shall prevent an individual 
from pursuing the vocation of manual 
labor and selling or trading the products 
thereof; ..." 

Question 



May pn individual enterpreneur, doing his own work, work longer 

hours than prescribed bv the code? Or does Section 5 of the National 

Industrial Recovery Act prohibit such enforcement against him? 

P. ■cuF&ion 



By construing the work prevent in the foregoing section of t le 
N.I.R.A. some of the difficulty presented by this problem will be 
eliminated. The following definitions of that word show that 
prevent is substantially the same as prohibit ; therefore if the en- 
trepreneur here is allowed to work at all ne is, of course, not 
prohibited from "pursuing the vocation of manual lrbor", and the 
next question to arise the propriety of limiting his hours of labor 
at all; 

"Prevent. 1. To come or go before; to precede; 

to be beforehand with; to anticipate; 
to forestall. Obs. or Archaic. 

2. To intercept; hinder; impede; keep 
(from); frustrate; stop; check; 
thwart; to keep from happening or existing; 
--often followed by from ; as, to prevent 
one from coming." Webster's New 
International, Dictionary (1919). 
9S35 



-123- 



"Frevent. To hinder, impede, or preclude; to obstruct; 
to intercept." Slack's lav Dictionary, 3d ed. 1933. 

"Prevent. To hinder; to obstruct; to intercept." 
Bouvier, La™ Dictionary, Eagle's 3rd Revision, 1914, 

"'Prevent, ' as used in Acts- 1876-9, p. 413, • conferring 
power on the municipal authorities of a citv to -pre- 
vent the selling of spirituous, vinous, or malt liquors 
within the corporate limits "henever they may deem it 
expedient, is synonymous with 'prohibit 1 : 'The differ- 
ence between 'prevent' pnd 'prohibit' is not material. 
If there is any difference, 'prevent' is the stronger 
work — conveying the ide? of prohibition, and the use 
of the means necessary to give it effect. 

"In re Jones, 78 Ala. .419,- 421." 6 Words & Phrases (1904), 

Since the meaning of prevent as applied in In re Jones , supra , is 
in reference to the preventing of .one engaging in a certain kind of busi- 
ness, the meaning here is preferred to other possible meanings because 
tiie problem in the Alabama Case is somewhat similar to the question here 
pursued. This case is thought to be the only one even approaching our 
facts. 

But this defining of the -"rord prevent do.es not satisfactorily 
answer things. Unless we can assume that hours of labor provisions 
applying to ordinary wage earners .must also apply to an enteroreneur 
who does his own work, cases upholding such labor provisions are not 
controlling. The wage earner has only his right to labor to oe con- 
sidered, but this manager-laborer has his business interests 'to be 
considered as well. 

Apparently the only suostantial injury which would, result to 
this entrepreneur because of curtailing hi-s hours of labor is that 
the- productive capacity of his business would be regulated to his 
detriment. Therefore, the closes cases to tiie situation here in- 
volved are those concerning the propriety of limiting the production 
of a business unit. 

One line oi cases upholds the limitation of the -production of 
oil and natural gas, but in so far a? they rely upon- the prevention 
of waste of a natural resource they are not particularly helpful. 
In this resnect see: 

Ohio Oil Co, v. Indiana , 177 U. S. 190, 20 S. C. 576 (1900)* 
Commonvealth v. Trent , 117 Kv. 34, 77 S. '-,. 390 (1903); 
Bardini Petroleum Co. v. Superior Court , 284 U. S. 8, 52 

Sup. Ct, 103 (1931); """ ' ■ ■ ' 

Feople ex rel. Stevenant v. Associated Oil Co . , 221 Gal. 93, 

294 Fac. 717 (1930); 
Julian v. Copsha"r . 145 Okla. 237, 292 Fac. 841 (1930). 



9835 



-124- 

Other cases approving acts of Congress, state statutes, or a city ordin- 
ance dealing with limitation of production are: 

Starring v.Frazie r, 4 Fed. Supp. 818, D. Ct. Tenn (1933) 

(Machine hours in Underwear and Allied Products Manu- 
facturing Industry) ; 
N ebbia v. New York , 291 U.S. 502 (1934) (State statute, 

milk prices more than production): 
Lindsey v. Carbonic Gas Co ., 220 U.S. 61, 31 Sup, Ct. 337 

(1911) (Waste of natural gas, state statute); 
West, Attorney General of the State of Oklahoma v. Kansas 

Natural Gas Co .. 221 U.S. 229, 31 Sup. Ct. 564 (1911) 
(Natural gas, state statute); 
Wallas v.Carbon Co., 254 U.S. 300, 41 Sup. Ct. 118 (192^) 

(Natural Gas, state statute); 
Champlin Refining Co. v. Corporation Commission of Oklahoma , 
286 U.S. 210, 52 Sup. Ct. 559 (1932) (Petroleum waste', 
state statute); 
Mars v, Oxford . 32 Fed. (2d) 134 (C.C.A.8th, 1929) (cert. den. 
in 280 U.S. 563, 59 Sup. Ct. 24 (1929)) (Oil production, 
city ordinance). 

The following cases disapprove state statutes on control of pro- 
duction: 

William v. Standard Oil . 278 U.S. 235, 49 Sup. Ct. 115 
(1929) (Gasoline prices more than production); 

New State Ice Co. v.Liebman , 285 U.S. 262, 52 Sup. Ct. 
371 (1932) (Production of ice). 

In Starring v.Frazier , supra , a dyer was discharged because the 
Code of Fair Competition for the Underwear and Allied Products Manu- 
facturing Industry limited the machine hours of sewing machines and 
knitting machines, thereby reducing the amount of work of his employer. 
The court refused him injunctive relief from the operation of the code 
in bringing about such discharge because of the remoteness of the injury 
involved. Therefore, this case only impliedly upholds the code pro- 
visions limiting production. 

Other cases concerning the control of production have risen under 
the National Industrial Recovery Act. In Willamette Valley Lumber Co . 
v.Watzek et,al . , B.C. Ore., Jan 24, 1934 (see page 150 of Legal Research 
Bulletin 27) plaintiff was denied an increase in his alloted quota of 
production of lumber under the code even though he was under contract 
for delivering electric energy by-products from which he would derive 
large revenues. (For a discussion of this case see note in 43 Yale Law 
Journal 827). 

In Ryan et al. v. Amazon Petroleum Corporation et al. ,C.C.A. 5th, 
1934 (see page 151 of Bulletin 27, supra), the plaintiff sought to enjoin 
the enforcement of Section 9 (c) of the N. I.R.A. , which .prohibited the 
production or withdrawal from storage of oil in excess of amounts allow- 
ed under state laws. The court assumed the regulation of oil product- 
ion of the state to be valid and upheld the cooperation of federal and 

9835 



-125- 

state action. The court denied the injunction and approved reflat- 
ions pursuant to Section 10 (a) of the Act which provided for inspect- 
ion of books and monthly statements in order to follow the interstate 
flow of oil. 

In Richmond Hosiery Mills v. Camp . D.C. N.D. Ga. , Eq. No. 7 58, 
May 18, 1934 (see page 153 of Bulletin 27, supra), the complainant was 
denied an injunction to restrain enforcement of a provision in the Hos- 
iery Code which restricted the hours of operation of productive machinery. 
The court considered that the means adopted by the code were not unreas- 
onable, arbitrary or capricious, and that the means selected had a reas- 
onable relation to the end desired. The production curtailment was up~ 
held as a valid effort to eliminate unfair competition. 

The following cases were where convictions were obtained upon 
guilty pleas for violation of code provisions designed to limit production : 

United States v. Allied Dye and Frint Works, Inc., D.C . D. , N. J. , 

April, 1934 (see page 150 of Bulletin 27, supra) (Operation 
of machinery in excess of time approved by the Code of Fair 
Competition for the Rayon Silk Dyeing and Printing Code); 

United States v. Radiance Piece Dye Works, Inc ., D. CD. ,N.J. , 
April 27, 1934 (see page 150 of Bulletin 27, supra) (Sane 
code provisions as in the Allied Dye and Print Works Case, 
supra) ; 

United States v. Greenville Finishing Co . , D. C . D. R. I". , Apr i 1 , 
1934 (see page 151 of Bulletin 27, supra) (Violation of 
machine hours limitation of the Cotton Textile Code). 

However, limitation of production has not always been upheld. 
In Edgewater Dairy Co. et al. v. Wallace et al., D. CN.D. 111. , Eq. No. 
13878, June 26, 1934 (see page 601 of Bulletin 27, supra), a milk 
license for the Chicago area issued pursuant to the A.A.A. was held 
to be void as an attempt to regulate production which neither const- 
ituted nor affected interstate commerce. Of course, this case does 
not necessarily stand as opposed to the validity of production con- 
trol since the problem might have been given further consideration 
had the interstate commerce features of the case been clear. (See 
also United States v. Smith et al., D.C. E.D. Tex., Feb. 26, 1934 
(see page 152 of Bulletin 27, supra), for a case under the Petroleum 
Code where production quotas are unconstitutional because not author- 
ized by the Act, ) 

Conclusion 

An individual enterpreneur cannot be stopped from doing his own 
work by the provisions of a code. However, of a code applying to the 
industry in which he is engaged prescribes the number of hours for. its 
workers, he probably cannot lawfully work more than the prescribed num- 
ber of hours. At least code provisions limiting the number of hours which 
one may work can be enforced against him if there is no unlawful cont- 
rol of the production of his business. It is believed that production 
control, especially in emergency, is constitutional. 

E. A. King 
Legal Research 

EAK:FC 

9835 



-126- 



APPENDIX K. . ' 

TABULATION OF VIOLATION DATA - OWNER-OPERATOR CONTROL PROVISIONS 

Table 19. Listing of violations of code control clauses affecting 
hours of owner operators. 

Table 20. Listing of code, control clauses affecting hours of owner 
operators in selected industries. 



98S5 



-127- 

TABLE #19 

LISTING OF VIOLATIONS OF CODE CONTROL CLAUSES 
AFFECTING HOURS OF OWNER OPERATORS. 



TYPE OF ". 
VIOLATION 

Employer working 
more than code 
maximum where 
■orohibited 



TOTAL NO. 
OF CASES 



NO. ADJUSTED NO. DROPPED 



PENDING 



391 



312 



66 



13 



Exceeding -oermitted 
number of persons 
working unlimited 
hours 

Working during hours 
nf the day not 
permitted by code. 



86 



218 



695 



77 



143 
531 



61 
133 



15 
31 



SOURCE: 

Tabulations of 

N. R. A. State Office Conrolaint Statistics. 

(Violations of Labor Provisions) 

Compiled by Statistical Section, Field Division 



NRA. 



9835 



-128- ■ 
TASLE #20 

LISTING CF VIOLATIONS OF CODE CONTROL CLAUSES 
AFFECTING HOURS OF OWNER OPERATORS IN SELECTED 
INDUSTRIES 



CODE 


NO. 


INDUSTRY 


TOTAL NO. 
OF CASES 


ADJUSTED 


NO 


VIOLATIONS 


• DROPPED 


445 




Baking 


12 


8 




4 




398 




Barber Shot) 
Trade 


135 


50 




65 


20 


217 




Dental Laboratory 16 
Pleating, Stitching 

& Bonnaz , etc. 4 


10 

1 




5 

1 


1 
2 


280 




Retail Solid Fuel 


5 






5 




256 




Schiffili, Hand 

Machine Embrodery 7 


1 




3 


3 



Totals 



179 



70 



83 



26 



9835 # 



OFFICE OF THE NATIONAL RECOVERY ADMINISTRATION 
THE DIVISION OF REVIEW 

THE WORK OF THE DIVISION OF REVIEW 

Executive Order No. 7075, dated June 15, 1935, established the Division of Review of the 
National Recovery Administration. The pertinent part of the Executive Order reads thus: 

The Division of Review shall assemble, analyze, and report upon the statistical 
information and records of experience of the operations of the various trades and 
industries heretofore subject to codes of fair competition, shall study the ef- 
fects of such codes upon trade, industrial and labor conditions in general, and 
other related matters, shall make available for the protection and promotion of 
the public interest an adequate review of the effects of the Administration of 
Title I of the National Industrial Recovery Act, and the principles and policies 
put into effect thereunder, and shall otherwise aid the President in carrying out 
his functions under the said Title. I hereby appoint Leon C. Marshall, Director of 
the Division of Review. 

The study sections set up in the Division of Review covered these areas: industry 
studies, foreign trade studies, labor studies, trade practice studies, statistical studies, 
legal studies, administration studies, miscellaneous studies, and the writing of code his- 
tories. The materials which were produced by these sections are indicated below. 

Except for the Code Histories, all items mentioned below are scheduled to be in mimeo- 
graphed form by April 1, 1936. 

THE CODE HISTORIES 

The Code Histories are documented accounts of the formation and administration of the 
codes. They contain the definition of the industry and the principal products thereof; the 
classes of members in the industry; the history of code formation including an account of the 
sponsoring organizations, the conferences, negotiations and hearings which were held, and 
the activities in connection with obtaining approval of the code; the history of the ad- 
ministration of the code, covering the organization and operation of the code authority, 
the difficulties encountered in administration, the extent of compliance or non-compliance, 
and the general success or lack of success of the code, and an analysis of the operation of 
code provisions dealing with wages, hours, trade practices, and other provisions. These 
and other matters are canvassed not only in terms of the materials to be found in the files, 
cut also in terms of the experiences of the deputies and others concerned with code formation 
and administration. 

The Code Histories, (including histories of certain NRA units or agencies) are not 
mimeographed. They are to be turned over to the Department of Commerce in typewritten form. 
All told, approximately eight hundred and fifty (850) histories will be completed. This 
number includes all of the approved codes and some of the unapproved codes. (In Work 
Materials No 18, Content s of Code Histries . will be found the outline which governed 
the preparation of Code Histories.) 

(In the case of all approved codes and also in the case of some codes not carried to 
final approval, there are in NRA files further materials on industries. Particularly worthy 
of mention are the Volumes I, II and III which constitute the material officially submitted 
to the President in support of the recommendation for approval of each code. These volumes 
9768--1 . 



-ii- 

set forth the origination of the code, the sponsoring group, the evidence advanced to sup- 
port the proposal, the report of the Division of Research and Planning on the industry, the 
recommendations of the various Advisory Boards, certain types of official correspondence, 
the transcript of the formal hearing, and other pertinent matter. There is also much offi- 
cial information relating to amendments, interpretations, exemptions, and other rulings. The 
materials mentioned in this paragraph were of course not a part of the work of the Division 
of Review. ) 

THE WORK MATERIALS SERIES 

In the work of the Division of Review a considerable number of studies and compilations 
of data (other than those noted below in the Evidence Studies Series and the Statistical 
Material Series) have been made. These are listed below, grouped according to the char- 
acter of the material. (In Work M ateria ls N^. 12- T entati ve Outlines and Summaries of 
Studies in Process , these materials are fully described). 

I ndur try Studies 

Automobile Industry, An Economic Survey of 

Bituminous Coal- Industry under Free Competition and Code Regulation, Economic Survey of 

Electrical Manufacturing Industry, The 

Fertilizer Industry, The 

Fishery Industry and the Fishery Codes 

Fishermen and Fishing Craft, Earnings of 

Foreign Trade under the National Industrial Recovery Act 

Part A - Competitive Position of the United States in International Trade 1927-29 through 

1934. 
Part B - Section 3 (e) of NIRA and its administration. 
Part C - Imports and Importing under NRA Codes. 
Part D - Exports and Exporting under NRA Codes. 

Forest Products Industries, Foreign Trade Study of the 

Iron and Steel Industry, The 

Knitting Industries, The 

Leather and Shoe Industries, The 

Lumber and Timber Products Industry, Economic Problems of the 

Men's Clothing Industry, The 

Millinery Industry, The 

Motion Picture Industry, The 

Migration of Industry, The: The Shift of Twenty-Five Needle Trades From New York State, 
1926 to 1934 

National Labor Income by Months, 1929-35 

Paper Industry, The 

Production, Prices, Employment and Payrolls in Industry, Agriculture and Railway Trans- 
portation, January 1923, to date 

Retail Trades Study, The 

Rubber Industry Study, The 

Textile Industry in the United Kingdom, France, Germany, Italy, and Japan 

Textile Yarns and Fabrics 

Tobacco Industry, The 

Wholesale Trades Study, The 

Women's Neckwear and Scerf Industry, Financial and Labor Data on 

9758 — 2 



- iii - 

Women's Apparel Industry, Some Aspects of the 

T rade P ractic e St udies 

Commodities, Information Concerning: A Study of NRA and Related Experiences in Control 
Distribution, Manufacturers' Control of: Trade Practice Provisions in Selected NRA Codes 
Distributive Relations in the Asbestos Industry 
Design Piracy: The Problem and Its Treatment Under NRA Codes 
Electrical Mfg. Industry: Price Filing Study 
Fertilizer Industry: Price Filing Study 

Geographical Price Relations Under Codes of Fair Competition, Control of 
Minimum Price Regulation Under Codes of Fair Competition 
Multiple Basing Point System in the Lime Industry: Operation of the 
Price Control in the Coffee Industry 
Price Filing Under NRA Codes 
Production Control in the Ice Industry 
Production Control, Case Studies in 

Resale Price Maintenance Legislation in the United States 

Retail Price Cutting, Restriction of, with special Emphasis on The Drug Industry. 
Trade Practice Rules of The Federal Trade Commission (1914-1935) : A classification for 
comparison with Trade Practice Provisions of NRA Codes. 

Labor s tudies 

Cap and Cloth Hat Industry, Commission Report on Wage Differentials in 

Earnings in Selected Manufacturing Industries, by States, 1933-35 

Employment, Payrolls, Hours, and Wages in 115 Selected Code Industries 1933-35 

Fur Manufacturing, Commission Report on Wages and Hours in 

Hours and Wages in American Industry 

Labor Program Under the National Industrial Recovery Act, The 

Part A. Introduction 

Part B. Control of Hours and Reemployment 

Part C. Control of Wages 

Par'. D. Control of Other Conditions of Employment 

Part E. Section 7(a) of the Recovery Act 
Materials in the Field of Industrial Relations 
PRA Census of Employment, June, October, 1933 
Puerto Rico Needlework, Homeworkers Survey 

Administrative Studies 

Administrative and Legal Aspects of Stays, Exemptions and Exceptions, Code Amendments, Con- 
ditional Orders of Approval 

Administrative Interpretations of NRA Codes 

Administrative Law and Procedure under the NIRA 

Agreements Under Sections 4(a) and 7(b) of the NIRA 

Approve Codes in Industry Groups, Classification of 

Basic Code, the — (Administrative Order X-61) 

Code Authorities and Their Part in the Administration of the NIRA 
Part A. Introduction 
Part B. Nature, Composition and Organization of Code Authorities 

9768—2. 



- iv - 

Part C. Activities of the Code Authorities 

Part D. Code Authority Finances 

Part E. Summary and Evaluation 
Code Compliance Activities of the NRA 
Code Making Program of the NRA in the Territories, The 
Code Provisions and Related Subjects, Policy Statements Concerning 
Content of NIRA Administrative Legislation 

Part A. Executive and Administrative Orders 

Part B. Labor Provisions in the Codes 

Part C. Trade Practice Provisions in the Codes 

Part D. Administrative Provisions in the Codes 

Part E. Agreements under Sections 4(a) and 7(b) 

Part F. A Type Case: The Cotton Textile Code 
Labals Under NRA, A Study of 

Model Code and Model Provisions for Codes, Development of 

National Recovery Administration, The; A Review of its Organization and Activities 
NRA Insignia 

President's Reemployment Agreement, The 

President's Reemployment Agreement, Substitutions in Connection with the 
Prison Labor Problem under NRA and the Prison Compact, The 
Problems of Administration in the Overlapping of Code Definitions of Industries and Trades, 

Multiple Code Coverage, Classifying Individual Members of Industries and Trades 
Relationship of NRA to Government Contracts and Contracts Involving the Use of Government 

Funds 
Relationship of NRA with States and Municipalities 
Sheltered Workshops Under NRA 
Uncodified Industries: A Study of Factors Limiting the Code Making Program 

Legal S tud ies 

Anti-Trust Laws and Unfair Competition 

Collective Bargaining Agreements, the Right of Individual Employees to Enforce 

Commerce Clause, Federal Regulation of the Employer-Employee Relationship Under the 

Delegation of Power, Certain Phases of the Principle of, with Reference to Federal Industrial 
Regulatory Legislation 

Enforcement, Extra-Judicial Methods of 

Federal Regulation through the Joint Employment of the Power of Taxation and the Spending 
Power 

Government Contract Provisions as a Means of Establishing Proper Economic Standards, Legal 
Memorandum on Possibility of 

Industrial Relations in Australia, Regulation of 

Intrastate Activities Which §o Affect Interstate Comjaerce 3§ to Bring them Under the Com- 
merce Clause, Cases on 

Legislative Possibilities of the State Constitutions 

Post Office and Post Road Power — Can it be Used as a Means of Federal Industrial Regula- 
tion? 

State Recovery Legislation in Aid of Federal Recovery Legislation History and Analysis 

Tariff Rates to Secure Proper Standards of Wages and Hours, the Possibility of Variation in 

Trade Practices and the Anti-Trust Laws 

Treaty Making Power of the United States 

War Power, Can it be Used as a Means of Federal Regulation of Child Labor? 

9768—4 . 



- V - 

THE E VIDE NCE STUDIES SERIES 

The Evidence Studies were originally undertaken to gather material for pending court 
oases. After the Schechter decision the project was continued in order to assemble data for 
use in connection with the studies of the Division of Review. The data are particularly 
concerned with the nature, size and operations of the industry; and with the relation of the 
industry to interstate commerce. The industries covered by the Evidence Studies account for 
more than one-half of the total number of workers under codes. The list of those studies 
follows: 



Automobile Manufacturing Industry 
Automotive Parts and Equipment Industry 
Baking Industry 

Boot and Shoe Manufacturing Industry 
Bottled Soft Drink Industry 
Builders' Supplies Industry 
Canning Industry 
Chemical Manufacturing Industry 
Cigar Manufacturing Industry 
Coat and Suit Industry 
Construction Industry 
Cotton Garment Industry 
Dress Manufacturing Industry 
Electrical Contracting Industry- 
Electrical Manufacturing Industry 
Fabricated Metal Products Mfg. and Metal Fin- 
ishing and Metal Coating Industry 
Fishery Industry 

Furniture Manufacturing Industry 
General Contractors Industry 
Graphic Arts Industry 
Gray Iron Foundry Industry 
Hosiery Industry 

Infant's and Children's Wear Industry 
Iron and Steel Industry 



Leather Industry 

Lumber and Timber Products Industry 
Mason Contractors Industry 
Men's Clothing Industry 
Motion Picture Industry 
Motor Vehicle Retailing Trade 
Needlework Industry of Puerto Rico 
Painting and Paperhanging Industry 
Photo Engraving Industry 
Plumbing Contracting Industry 
Retail Lumber Industry 
Retail Trade Industry 
Retail Tire and Battery Trade Industry 
Rubber Manufacturing Industry 
Rubber Tire Manufacturing Industry 
Shipbuilding Industry 
Silk Textile Industry 
Structural Clay Products Industry 
Throwing Industry 
Trucking Industry 
Waste Materials Industry 
Wholesale and Retail Food Industry 
Wholesale Fresh Fruit and Vegetable Indus- 
try 
Wool Textile Industry 



THE STATISTICAL MATERIALS SERIES 



This series is supplementary to the Evidence Studies Series. The reports include data 
on establishments, firms, employment. Payrolls, wages, hours, production capacities, ship- 
ments, sales, consumption, stocks, prices, material costs, failures, exports and imports. 
They also include notes on the principal qualifications that should be observed in using the 
data the technical methods employed, and the applicability of the material to the study of 
the industries concerned. The following numbers appear in the series: 
9768—5.