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29 C.F.R. § 776.20 : Labor — REGULATIONS RELATING TO LABOR — WAGE AND HOUR DIVISION, DEPARTMENT OF LABOR — STATEMENTS OF GENERAL POLICY OR INTERPRETATION NOT DIRECTLY RELATED TO REGULATIONS — INTERPRETATIVE BULLETIN ON THE GENERAL COVERAGE OF THE WAGE AND HOURS PROVISIONS OF THE FAIR LABOR STANDARDS ACT OF 1938 — GENERAL —Engaging in "The Production of Goods for Commerce" — ''Goods.''

(a) The statutory provision. An employee is covered by the wage and hours provisions of the Act if he is engaged in the "production" (as explained in §§776.15 through 776.19 ) "for commerce" (as explained in §776.21 ) of anything defined as "goods" in section 3(i) of the Act. This definition is:

Goods means goods (including ships and marine equipment), wares, products, commodities, merchandise, or articles or subjects of commerce of any character, or any part or ingredient thereof, but does not include goods after their delivery into the actual physical possession of the ultimate consumer thereof other than a producer, manufacturer, or processor thereof.

(b) "Articles or subjects of commerce of any character." It will be observed that "goods" as defined in the Act are not limited to commercial goods or articles of trade, or, indeed, to tangible property, but include "articles or subjects of commerce of any character (emphasis supplied). 18 It is well settled that things such as "ideas, * * * orders, and intelligence" are "subjects of commerce." Telegraphic messages have, accordingly, been held to be "goods" within the meaning of the Act. 19 Other articles or subjects of commerce which fall within the definition of "goods" include written materials such as newspapers, magazines, brochures, pamphlets, bulletins, and announcements; 20 written reports, fiscal and other statements and accounts, correspondence, lawyers' briefs and other documents; 21 advertising, motion picture, newspaper and radio copy, artwork and manuscripts for publication; 22 sample books; 23 letterheads, envelopes, shipping tags, labels, check books, blank books, book covers, advertising circulars and candy wrappers. 24 Insurance policies are "goods" within the meaning of the Act; 25 so are bonds, stocks, bills of exchange, bills of lading, checks, drafts, negotiable notes and other commercial paper. 26 "Goods" includes gold; 27 livestock; 28 poultry and eggs; 29 vessels; 30 vehicles; 31 aircraft; 32 garments being laundered or rented; 33 ice; 34 containers, as, for example, cigar boxes or wrapping paper and packing materials for other goods shipped in commerce; 35 electrical energy or power, gas, etc.; 36 and by-products, 37 to mention only a few illustrations of the articles or subjects of "trade, commerce, transportation, transmission, or communication among the several States, or between any State and any place outside thereof" which the Act refers to as "goods." The Act's definitions do not, however, include as "goods" such things as dams, river improvements, highways and viaducts, or railroad lines. 38

18 As pointed out in Lenroot v. Western Union Tel. Co., 141 F. 2d 400 (C.A. 2), the legislative history shows that the definition was originally narrower, and that subjects of commerce were added by a Senate amendment.

19Western Union Tel. Co. v. Lenroot323 U.S. 490.

20Mabee v. White Plains Pub. Co.,327 U.S. 178; Yunker v. Abbye Employment Agency, 32 N.Y.S. 2d 715; Berry v. 34 Irving Place Corp., 52 F. Supp. 875 (S.D. N.Y.); Ullo v. Smith, 62 F. Supp. 757, affirmed in 177 F. 2d 101 (C.A. 2); see also opinion of the four dissenting justices in 10 E. 40th St. Bldg. v. Callus, 325 U.S. at p. 586.

Waste paper collected for shipment in commerce is goods. See Fleming v. Schiff, 1 W.H. Cases 893 (D. Colo.), 15 Labor Cases (CCH) par. 60,864.

21Phillips v. Meeker Coop. Light & Power Asso., 63 F. Supp. 733, affirmed in 158 F. 2d 698 (C.A. 8); Lofther v. First Nat. Bank of Chicago, 48 F. Supp. 692 (N.D. Ill.) See also Rausch v. Wolf, 72 F. Supp. 658 (N.D. Ill). There are other cases (e.g., Kelly v. Ford, Bacon & Davis, 162 F. 2d 555 (C.A. 3) and Bozant v. Bank of New York, 156 F. 2d 787 (C.A. 2) which suggest that such things are "goods" only when they are articles of trade. Although the Supreme Court has not settled the question, such a view appears contrary to the express statutory definitions of "goods" and "commerce".

22Robert v. Henry Phipps Estate, 156 F. 2d 958 (C.A. 2); Baldwin v. Emigrant Industrial Sav. Bank, 150 F. 2d 524 (C.A. 2), certiorari denied 326 U.S. 757; Bittner v. Chicago Daily News Ptg. Co., 4 W.H. Cases 837 (N.D. Ill.), 29 Labor Cases (CCH) par. 62,479; Schinck v. 386 Fourth Ave. Corp., 49 N.Y.S. 2d 872.

23Walling v. Higgins, 47 F. Supp. 856 (E.D. Pa.).

24McAdams v. Connelly, 8 W.H. Cases 498 (W.D. Ark.), 16 Labor Cases (CCH) par. 64,963; Walling v. Lacy, 51 F. Supp. 1002 (D. Colo.); Tobin v. Grant 8 W.H. Cases 361 (N.D. Calif.). See also Walling v. Sieving, 5 W.H. Cases 1009 (N.D. Ill.), 11 Labor Cases (CCH) par. 63,098.

25Darr v. Mutual Life Ins. Co., 169 F. 2d 262 (C.A. 2), certiorari denied 335 U.S. 871.

26Bozant v. Bank of New York, 156 F. 2d 787 (C.A. 2).

27Walling v. Haile Gold Mines, 136 F. 2d 102 (C.A. 4); Fox v. Summit King Mines, 143 F. 2d 926 (C.A. 9).

28Walling v. Friend, 156 F. 2d 429 (C.A. 8).

29Walling v. DeSoto Creamery & Produce Co., 51 F. Supp. 938 (D. Minn).

30Slover v. Wathen, 140 F. 2d 258 (C.A. 4).

31Hertz Drivurself Stations v. United States, 150 F. 2d 923 (C.A. 8).

32Jackson v. Northwest Airlines, 75 F. Supp. 32 (D. Minn.).

33Phillips v. Star Overall Dry Cleaning Laundry Co., 149 F. 2d 416 (C.A. 2).

34Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4); Atlantic Co. v. Walling, 131 F. 2d 518 (C.A. 5).

35Enterprise Box Co. v. Fleming, 125 F. 2d 897 (C.A. 5), certiorari denied, 316 U.S. 704; Fleming v. Schiff, 1 W.H. Cases 883 (D. Colo.), 5 Labor Cases (CCH) par. 60,864.

36Walling v. Connecticut Co.; 62 F. Supp. 733 (D. Conn.), affirmed 154 F. 2d 552 (C.A. 2).

37Walling v. Peoples Packing Co., 132 F. 2d 236 (C.A. 10), certiorari denied 318 U.S. 774.

38Engebretsen v. Albrecht, 150 F. 2d 602 (C.A. 7); Kenny v. Wigton-Abbott Corp., 80 F. Supp. 489 (D. N.J.).

(c) "Any part or ingredient." Section 3(i) draws no distinction between goods and their ingredients and in fact defines goods to mean "goods" * * * or any part or ingredient thereof." The fact that goods are processed or changed in form by several employers before going into interstate or foreign commerce does not affect the character of the original product as "goods" produced for commerce. Thus, if a garment manufacturer sends goods to an independent contractor within the State to have them sewn, after which he further processes and ships them in interstate commerce, the division of the production functions between the two employees does not alter the fact that the employees of the independent contractor are actually producing ("working on") the "goods" (parts or ingredients of goods) which enter the channels of commerce. 39

39Schulte Co. v. Gangi,328 U.S. 108.

Similarly, if a manufacturer of buttons sells his products within the State to a manufacturer of shirts, who ships the shirts in interstate commerce, the employees of the button manufacturer would be engaged in the production of goods for commerce; or, if a lumber manufacturer sells his lumber locally to a furniture manufacturer who sells furniture in interstate commerce, the employees of the lumber manufacturer would likewise come within the scope of the Act. Any employee who is engaged in the "production" (as explained in §776.15 ) of any part or ingredient of goods produced for trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof is engaged in the production of "goods" for commerce within the meaning of the Act. 40

40Roland Electrical Co. v. Walling,326 U.S. 657; Bracy v. Luray, 138 F. 2d 8 (C.A. 4); Walling v. W. J. Haden Co., 153 F. 2d 196 (C.A. 5); Mid-Continent Pipe Line Co. v. Hargrave, 129 F. 2d 655 (C.A. 10); Boiling v. Allison, 4 W. H. Cases 500 (N.D. Okla.); Hanson v. Lagerstrom, 133 F. 2d 120 (C.A. 8); Walling v. Comet Carriers, 151 F. 2d 107 (C.A. 2); Walling v. Griffin Cartage Co., 62 F. Supp. 396, affirmed in 153 F. 2d 587 (C.A. 6); Walling v. Kerr, 47 F. Supp. 852 (E.D. Pa.).

(d) Effect of the exclusionary clause. The exclusionary clause in the definition that excepts "goods after their delivery into the actual physical possession of the ultimate consumer thereof other than a producer, manufacturer, or processor thereof," is intended to protect ultimate consumers other than producers, manufacturers, or processors of the goods in question 41 from the "hot goods" provisions of section 15(a)(1) of the Act. 42 Section 15(a)(1) makes it unlawful for any person "to transport * * * (or * * * ship * * * in commerce * * * any goods" produced in violation of the wage and hours standards established by the Act. (Exceptions are made subject to specified conditions for common carriers and for certain purchasers acting in good faith reliance on written statements of compliance. See footnote 53 to §776.15(a).) By defining "goods" in section 3(i) so as to exclude goods after their delivery into the actual physical possession of the ultimate consumer (other than a producer, manufacturer, or processor thereof) Congress made it clear that it did not intend to hold the ultimate consumer as a violator of section 15(a)(1) if he should transport "hot goods" across a State line. 43 Thus, if a person purchases a pair of shoes for himself from a retail store 44 and carries the shoes across a State line, the purchaser is not guilty of a violation of section 15(a)(1) if the shoes were produced in violation of the wage or hours provisions of the statute. But the fact that goods produced for commerce lose their character as "goods" after they come into the actual physical possession of an ultimate consumer who does not further process or work on them, does not affect their character as "goods" while they are still in the actual physical possession of the producer, manufacturer or processor who is handling or working on them with the intent or expectation that they will subsequently enter interstate or foreign commerce. 45 Congress clearly did not intend to permit an employer to avoid the minimum wage and maximum hours standards of the Act by making delivery within the State into the actual physical possession of the ultimate consumer who transports or ships the goods outside of the State. Thus, employees engaged in building a boat for delivery to the purchaser at the boatyard are considered within the coverage of the Act if the employer, at the time the boat is being built, intends, hopes, or has reason to believe that the purchase will sail it outside the State. 46

41Southern Advance Bag & Paper Co. v. United States, 183 F. 2d 449 (C.A. 5); Phillips v. Star Overall Dry Cleaning Laundry Co, 149 F. 2d 485 (C.A. 2), certiorari denied 327 U.S. 780.

42Jackson v. Northwest Airlines, 70 F. Supp. 501.

43Hamlet Ice Co. v. Fleming, 127 F. 2d 165 (C.A. 4), certiorari denied 317 U.S. 634.

44 Note that the retail or service establishment exemption in section 13(a)(2) does not protect the retail store from a violation of the "hot goods" provision if it sells in interstate commerce goods produced in violation of section 6 or 7.

45 See cases cited above in footnotes 41, 42, 43, this section.

46Walling v. Lowe, 5 W.H. Cases (S.D. Fla.), 10 Labor Cases (CCH) 63,033. See also Walling v. Armbruster, 51 F. Supp. 166 (W.D. Ark.); Joshua Hendy Corp. v. Mills, 169 F. 2d 898 (C.A. 9); St. Johns River Shipbuilding Co. v. Adams, 164 F. 2d 1012 S. (C.A. 5).

29 C.F.R. § 776.20