exemption, based on a 37 hour 52 week work year, would be $3.41 instead of $2.75, based on a 37 hour 50 week work year.
Defendants counter plaintiffs' argument by asserting that the use by COLC of mean data has resulted in an exemption level that fairly represents the low income family population. They recognize that the use of mean data results in a large fraction of low income families having incomes below the low-budget level because income, other than that of the head, is unevenly distributed among families. But they contend, and support their contention with a showing by their economist, that the same situation would exist if median data were utilized.
In challenging the median data concept espoused by plaintiffs, defendants point out that it is only with respect to "other family income" that plaintiffs apply median data; they use mean data in applying their formula when it concerns family size, hours worked per week and weeks worked per year. To mix mean and median data is neither consistent nor logical assert the defendants.
Defendants' average (mean data) low income family numbers 3.8 members where the head is under 65 years of age and it has used that figure in establishing the $2.75 hourly wage exemption. If median data had been used, such a family would have numbered 3.5 members. The use of the median 3.5 family would result in a $699 deduction from the cost of living adjusted BLS lower budget, Autumn 1971, instead of the $280 deduction for the mean 3.8 family. If only families with incomes under $7,000 were to be considered the mean size would be 3.2 and the median size would be 2.6. $1,972 would be deducted from the mentioned budget in the case of the median size family with incomes under $7,000 while that deduction would be $1,118, in the case of the 3.2 mean size family. In this connection, it is to be noted that, at the time this Court declared the $1.90 hourly wage exemption illegal, it was the plaintiffs who argued for the 3.8 "average family size" whose head is under 65. 347 F. Supp. at 416.
Moreover, it was plaintiffs who heretofore contended for an "average work week of 37 hours." 347 F. Supp. at 417. But defendants have submitted evidence to show that the median work week is 40 hours. And data submitted by defendants discloses that in 1970 the heads of approximately 33,000,000 families out of 52,000,000 families worked at full-time jobs 50 to 52 weeks a year. In contrast to the $3.41 hourly wage rate exemption claimed by plaintiffs as a result of their mixing mean and median data with the resulting 37 hour 50 week work year computation, the defendants' computation of the hourly wage exemption level by the use of median data only ranged from $2.10 to $2.82. In that computation the median data of a 40 hour 50 week work year was used by defendants in some instances and a 40 hour 52 week work year was used in others.
The $2.75 hourly wage exemption rate promulgated by COLC on July 25, 1972, compares favorably with the rates computed by use of median data. This Court cannot say here that the $2.75 exemption rate lacks a rational basis.
To sustain COLC's application of the Economic Stabilization Act of 1970, as amended, does not require this Court to find that agency's construction of the Act is the only reasonable one, or even that this Court would have reached the same result if the question had arisen in the first instance in judicial proceedings. Unemployment Comm'n v. Aragon, 329 U.S. 143, 153, 67 S. Ct. 245, 91 L. Ed. 136 (1946), Udall v. Tallman, 380 U.S. 1, 16, 85 S. Ct. 792, 13 L. Ed. 2d 616 (1965), Udall v. Washington, Virginia and Maryland Coach Co., 130 U.S. App. D.C. 171, 175, 398 F.2d 765, 769 (1968), cert. denied, Washington Metropolitan Area Transit Com. v. United States, 393 U.S. 1017, 89 S. Ct. 620, 622, 21 L. Ed. 2d 561. In a case such as this the "judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body." Miss. Valley Barge Co. v. United States, 292 U.S. 282, 286-287, 54 S. Ct. 692, 694, 78 L. Ed. 1260 (1934), Udall v. Washington, Virginia and Maryland Coach Co., id. Thus the July 25, 1972 amendment of Cost of Living Council Regulation Sec. 101.104 setting a $2.75 hourly wage rate exemption is held to be valid. Defendants' motion for summary judgment will be granted and that of plaintiffs will be denied.
July 14, 1972 Court Ruling: Retroactive or Prospective
Ten days after this Court held invalid COLC's $1.90 hourly wage exemption regulation, the defendants filed a motion to amend that order to make it only operate prospectively. Thereafter defendants requested the Court to defer decision on the retroactivity issue unless and until the $2.75 exemption level was declared valid. Since the validity of that exemption level has been declared, it is proper that this Court at this time consider and decide the retroactivity question.
With respect to this matter it must be again recalled that this Court's jurisdiction is very limited. Section 211(d)(2) of the Economic Stabilization Act of 1970, as amended, authorizes this Court in a proper case to enjoin the application of a COLC regulation "to a person who is a party to litigation before it." The July 14, 1972 order of this Court granted a summary judgment in favor of the plaintiffs and plaintiff-intervenors and enjoined the application as to them of COLC Regulation Sec. 101.104 providing the $1.90 exemption level. So far as that order of this Court is concerned, no one else is affected.
In support of their motion to amend the July 14, 1972 order to make it apply only prospectively, defendants argue that as a result of the July 14, 1972 declaration of invalidity the $1.90 exemption level regulation is void ab initio and that, therefore, there was no wage exemption for the working poor from the date of the amendatory act, December 22, 1971, until a valid exemption regulation was promulgated -- that is, until July 25, 1972, the date of the now declared valid $2.75 exemption level regulation. During that period, December 22, 1971 to July 25, 1972, defendants contend that the working poor's wages were subject to the 5.5 percent increase regulation.
Defendants assert that if this Court was to make its July 14, 1972 order retroactive the Government's economic stabilization program would be seriously if not disastrously undermined. In an effort to support this argument they have filed a July 22, 1972 affidavit of the Chairman of the Pay Board. That affidavit is essentially a statement of generalities and conclusions. Counsel for defendants at the November 29, 1972 hearing on the then pending motions acknowledged that the affidavit had been drafted in haste after this Court's July 14, 1972 order before the COLC and Pay Board had analyzed its implications. "At the time that was drafted, the feeling was that it was going to cause chaos over there." p. 10, Tr. Nov. 29, 1972 hearing. In fact, as defendant's counsel candidly admitted, the affidavit in some parts was not correct. But now counsel in a supplemental brief contend that that affidavit shows that "retroactivity would produce three major inequities to employees."
First, it is claimed that retroactive application of this Court's July 14, 1972 order would result in inequities between organized employees who were earning less than $2.75 per hour but who had bargained for more than a 5.5 percent increase and organized employees at similar wage levels who bargained only for a 5.5 percent increase. While the affidavit does make such a general statement, it gives no clue as to the number of employees in each group. Furthermore all employees' organizations in entering into collective bargaining agreement were or should have been aware that the Pay Board's regulations did not prohibit agreements that provided for more than a 5.5 percent pay increase. What was prohibited was the payment of increases in wages without Pay Board approval. 6 C.F.R. § 201.17 (1972). The working poor should not be penalized because some labor organizations did not bargain for more than a 5.5 percent increase. Moreover, the very inequities that defendants assert would result from the retroactive application of this Court's July 14, 1972 order have at least in some cases been effected prior to July 14 by the Pay Board itself. Paragraph 5 of the Pay Board Chairman's affidavit states that that agency gave "special consideration to low paid employees beyond the $1.90 exemption" and the Chairman cites one case where the increase amounted to 14 percent. Of course, there would have been no increase if the collective bargaining did not provide for it.
Second, it is further contended that the retroactive application of this Court's July 14, 1972 order would effect inequities between organized employees who were earning less than $2.75 per hour who bargained for more than a 5.5 percent increase and unorganized employees at similar wage levels. In essence what defendants assert here is that since organized employees have greater economic strength than the unorganized, all working poor, whether or not organized, should be denied what was legally theirs -- the protection from the economic hardships that Congress gave to all working poor.
Third, retroactivity would produce inequities flowing from the disturbance of historic employer tandem relationships. Paragraph 11 of the Pay Board Chairman's affidavit states: "A typical tandem relationship involves a unit of hourly production employees whose wages are determined by a collective bargaining agreement, and a unit of salaried supervisors whose level of pay is subsequently established. In many cases, the hourly paid unit could receive a further increase, within the general guidelines, because of the retroactive change in the working poor exemption, while the tandem-claiming unit, with pay rates above the working poor level, could not maintain its historical differential within the same guideline." In their argument against retroactivity defendants are silent as to the effect of the $2.75 per hour level since July 14, 1972, on that historic tandem relationship. Either that relationship has been disturbed or the salaried supervisors' pay has been adjusted. But whatever may have happened prospectively to that relationship, equity speaks in a falsetto voice when it argues that the tandem relationship is so sacrosanct that its disturbance is to be avoided even to the extent of denying the working poor, between December 22, 1971 and July 15, 1972, a level of earnings sufficient to extricate them from that status.
Finally defendants argue that to make the July 14, 1972 order of this Court retroactive would be inequitable to employers since their products were priced to meet a $1.90 hourly wage level rather than a $2.75 hourly rate. Particularly should the employers not be penalized, argue the defendants, since it was the illegal action of the COLC that misled those employers. But COLC promulgated the $1.90 regulation after having its attention called to the questionable legality of that action. The Pay Board, pursuant to a request of COLC, on January 19, 1972, advised the latter that the $1.90 figure was "inconsistent with the purposes of the Amendments to the Economic Stabilization Act and supporting analysis." See Jennings v. Connally, 347 F. Supp. 409, 411, n. 6. While it was on January 29, 1972, that COLC determined that it was wages under $1.90 an hour that were to be exempted, it was not until February 24, 1972, that the invalid regulation was issued. Id. But before the promulgation of that regulation this action was instituted on February 3, 1972, challenging the validity of the $1.90 figure. To say now that the working poor, among the economically weakest citizens, should bear the costs of defendants' error does not sound in equity. Whatever harm that may have been suffered by employers as a result of COLC's illegal action is a matter which the latter should rectify with those employers.
Equity does not deny retroactivity and the law permits it as evidenced by Addison v. Holly Hill Co., 322 U.S. 607, 64 S. Ct. 1215, 88 L. Ed. 1488 (1944). That was an action brought by the employees against their employer Holly Hill Company for wage payments under the Fair Labor Standards Act. The employees had been denied the claimed wages because of a regulation promulgated by the Administrator of the Wage and Hour Division of the Department of Labor which exempted them from the minimum wage and overtime requirements of the Act. The Court held that the regulation was invalid because the Administrator exceeded his statutory authority. The case was remanded to the District Court with instructions to hold it until the Administrator acted within the authority given him by Congress and made a valid determination of the persons exempted from the Act. The Court, in recognizing that its disposition of the case would apply retroactively, stated (322 U.S. 620, 622, 64 S. Ct. at 1223):
The accommodation that we are making assumes, what we must assume, that the Administrator will retrospectively act as conscientiously within the bounds of the power given him by Congress as he would have done initially had he limited himself to his authority. To be sure this will be a retrospective judgment, and law should avoid retroactivity as much as possible. But other possible dispositions likewise involve retroactivity, with the added mischief of producing a result contrary to the statutory design.
. . .
In short, the judicial process is not without the resources of flexibility in shaping its remedies, though courts from time to time fail to avail themselves of them. The interplay between law and equity in the evolution of more just results than the hardened common law afforded, has properly been drawn upon in working out accommodating relationships between the judiciary and administrative agencies. And certainly in specific cases, such as those already referred to and in this, it is consonant with judicial administration and fairness not to be balked by the undesirability of retroactive action any more than courts have found it difficult to sanction legislative ratification of acts originally unlawful, United States v. Heinszen & Co., 206 U.S. 370, 27 S. Ct. 742, 51 L. Ed. 1098, 11 Ann.C. 688; Chuoco Tiaco v. Forbes, 228 U.S. 549, 33 S. Ct. 585, 57 L. Ed. 960; Graham & Foster v. Goodcell, 282 U.S. 409, 51 S. Ct. 186, 75 L. Ed. 415; Hirabayashi v. United States, 320 U.S. 81, 91, 63 S. Ct. 1375, 1381, 87 L. Ed. 1774, or retroactively to give prior legislation new scope.