Goldberg v. Whitaker House Cooperative, Inc.

RESPONDENT:Whitaker House Cooperative, Inc.
LOCATION:Mapp’s Residence

DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the First Circuit

CITATION: 366 US 28 (1961)
ARGUED: Mar 30, 1961
DECIDED: Apr 24, 1961

Facts of the case


Audio Transcription for Oral Argument – March 30, 1961 in Goldberg v. Whitaker House Cooperative, Inc.

Earl Warren:

Number 274 Arthur J. Goldberg, Secretary of Labor, Petitioner, versus Whitaker House Cooperative, Incorporated, et al.

Ms. Margolin.

Bessie Margolin:

Mr. Chief Justice, may it please the Court.

This case presents a question of the application of the Fair Labor Standards Act of two homeworkers in an industry with a history as old as the Act itself, of various efforts to avoid the application of the Act to its homeworkers.

In terms of the facts to this specific case, the question is whether such homeworkers in this industry and similar industries, by joining a cooperative which was initiated and sponsored and — and in no material essentials managed and is continuing to be so managed by their former employers are transformed into independent self-employed producers, so as to remove them from the regulation of the Act.

The courts below held that since the cooperative and that as found by the trial court, it was a bona fide member controlled cooperative.

That this was petition to distinguish this case from all previous cases in which comparable devices to avoid the Act that had been condemned.

There is no doubt of the past status of these homeworkers as employees subject to the Act.

They and similar homeworkers have throughout the years, consistently been so considered.

And not only have the — the courts, prior to the decision below in the instant case, refused to sanction all the passed devices and attempts designed to exclude these homeworkers from the scope of the Act, but repeated efforts to secure exemption by specific legislation have failed throughout the years.

The courts — the — the courts below didn’t know what this legislative background and expressly discarded the broad definitions of employment under this Act as being not very helpful.

The opinions on their face show that very little attention was paid to why these homeworkers have been regarded as employees within the scope of this Act and — or to the background which led to the plain legislative intent to include them within the scope of the broad coverage of the statutory definitions.

The — instead of looking at the purposes of the Act and at the homeworker — the history of the homeworker problem in this industry, the court — the courts below dealt with this — the issue in this case, as if it were simply a rather technical question as to who controlled this — this cooperative, which by the way, was organized as a separate legal entity, was incorporated and had the status of a legal entity.

The courts below — the trial court phrased — directed their attention to who could — who controlled the cooperative?

Did — may — may have fallen into confusion because there was also and still is a question in this case as to whether or not, the whole cooperative was not simply a sham or cloak to disguise the operations of — of individual former employers of homeworkers.

But the position of the Government is that whether or not, this was such as a sham and even if the employees — the homeworkers were given some bone fide voice in the operation of the cooperative, they are nonetheless, still employees of the cooperative and its managing officials under the definitions of the — the broad definitions of this Act, which includes any person acting directly or indirectly in the interest of an employer and person includes or individual partnership, association, corporation or any organized group of corporations.

Now, we submit that the cooperate — the cooperative certainly fits into that broad definition and that as a separate legal entity under the decisions of this Court, it — it is — it is the employer of the homeworkers, whether or not they are also bona fide — whether or not, they also have bona fide membership rights and interest.

Now the courts below distinguished this decision — this Court’s decision.

They recognized and both courts stated that it’s clear that a cooperative can have employees, but they said that the employ — the homeworkers were not simply employees.

They — they were members in that their membership interest was identical with their interest as — as workers and that since their interest as members and producers were the same, they were in effect, self-employed.

We submit that this reasoning is inconsistent with this Court’s decisions and that there’s nothing in the — even the technical common law, which would support the conclusion that the membership rights in a separate entity of this type are inconsistent with the workers being also employees.

I think — I think this was well illustrated in the rhetorical questions asked by — put by Judge Aldrich in his dissent below, when he asked that if a union were given a voice in management, would its members cease to be employees and if an employee acquires stock in a company does he cease to be an employee?

The — even in applying the control test, the courts below I think misconceived even conventional technical concepts of — of the control that has any relevance to the question of an employment relationship.

They concentrated on the — on whether or not, the homeworkers controlled the operation of the cooperation instead of inquiring into who controlled whether the management of the cooperative control — did not control the members as workers.

And we submit that the extent to which control is relevant to the determination an — of an employment relationship under this Act, that surely the control exercised over the workers, the members as workers, is much more significant and pertinent than what control they might have exercised over the cooperation as members.

That the status of these homeworkers as workers has remained unchanged since the organization of this cooperative, is perhaps best illustrated by a look at the past history of the Maine — of the Maine managing officials of this cooperative, Mrs. Whitaker who has been the general manager through – since the organization of the cooperative and admittedly participated actively in its organization.

Earl Warren:

When was that, Ms. Margolin?

Bessie Margolin:

In July 1957.

Earl Warren:


Bessie Margolin:

She, prior to that time for some years prior to that time, had employed that most of this Maine — the homeworkers from Maine, they are now 200 members of the — of the cooperative.

Bessie Margolin:

At the time of its organization, only 26 had signed the articles of incorporation and they were all — they were all homeworkers of Mrs. Whitaker’s individual business.

She – the — she became the general manager almost immediately and I won’t go into the details as to how she and her attorney directed the whole organizational meeting at which the articles of association were adopted after having been prepared in advance by Attorney, Bird, and the — all the bylaws also which had been prepared in advance were adopted at that same meeting and by 26 — the 26 homeworkers and the other two members were Mrs. Whitaker and Mr. Bird, they were 28 incorporators at all, altogether.

Immediately that meeting elected a board of directors, five homeworkers — homeworker members, who had all been homeworkers at Mrs. Whitaker and two of them had actually worked in her home as trimmers directly with her previously.

And that board of directors then proceeded immediately at the — on the same date to elect the officers.

It’s not quite clear why the board of directors elected the officers since the bylaws provided for the membership too, but they elected the officers and Mrs. Whitaker was elected general manager and a cousin of her husband, a Mr. Kennedy and it nowhere appears how he became a member or — got into the picture expect for his relationship to Mrs. Whitaker, and his interest in Mrs. Whitaker.

And the — Mr. Bird became president — Attorney Bird was elected president.

How — Mrs. Whitaker immediately as soon as the certificate of incorporation was — was filed with the Secretary of State of Maine, which was about a week after the organizational meeting and it was after Mrs. Whitaker had been elected an officer, she turned over her inventory.

She says the business’ lock, stock and barrel, but indications are that she had some accounts receivable which were not turned over, but the business continued to operate in her residence as before and that she became the principal place of business for the cooperative.

And she continued to operate, she herself testified, continued to function in the same way as she had in her individual business, except that she didn’t do the selling.

Now, the interesting point about what she had done in her own personal business, the interesting point about the selling is that Mrs. Doris Law, within a month after the organization of the cooperative, was given a contract as exclusive selling agent for the cooperative.

Now, Mrs. Doris Law had operated a similar business with Tennessee homeworkers, some of whom are now members of this cooperative and she had been enjoying the month — about a month before the organization of this cooperative, she had been enjoined the Tennessee from employing home — her homeworkers in violation of the Act.

Mrs. Whitaker had had early connections with Mrs. Law.

She had regularly for some time prior to the — when she was in her own business prior to the organization of the cooperative, she had for some time prior thereto, shipped regularly, a substantial quantities of goods produced by her Maine homeworkers to Mrs. Law, who distributed them.

So that Mrs. Law was in effect — had been in effect, a sales agent of Mrs. Whitaker.

Now, another person with a previous connection with Mrs. Whitaker’s business was a Mrs. Johnson who had been a former homeworker of Mrs. Whitaker and she had supplied yarn to the homeworkers of Mrs. Whitaker.

She joined the cooperative and she became the source of supply for the yarn to the homeworkers of the cooperative.

So that the business continued to all intents and purposes and in all essentials, had continued to operate except for the — for the specific provisions and requirements as to meetings that though with having a cooperative organization.

The homeworkers continued to operate the same as — and — and the management of it continued of their work, continued the same as it had under Mrs. Whitaker’s individual operation.

The net effect I think, it’s clear from a reading of the — of the record, the evidence in the record, is that Mrs. Whitaker and Mrs. Law found themselves in a situation with inventories on hand, when — when the web — web which they had acquired while operating in — under arrangements with homeworkers, which it was quite — which had become quite clear, were not valid and were in violation of — of the Act.

The — Doris Law had already been enjoined from hiring — employing the homeworkers contrary to the regulations of the administrator and Mrs. Whitaker undoubtedly knew of that injunction.

Mrs. — there was another case that was filed shortly thereafter and Mrs. Whitaker had been inspected by the investigator and had been advised that she too was subject to that — that — in her relationship with the homeworkers was subject to have — to the law, so that it is quite obvious that Mrs. Whitaker and Mrs. Law were primarily motivated by an interest in preserving the inventories, which they had on hand and continuing to operate their business.

Potter Stewart:

Motivated, you mean in this creation of this —

Bessie Margolin:

In — in the organization of the cooperative.

And they are the leading — they are the leading persons — have been since the beginning, the leading — the leading managing officials, if — if not the only managing officials in operating the cooperative.

Now, the court below — the trial court made much of the fact that the bylaws provided certain rights of membership and control in the homeworkers.

We submit that the meager rights the homeworkers had in the membership control are in no way inconsistent with their status as employees.

That as a matter of fact as the — Judge Aldrich in his dissent pointed out, most of them with 200 scattered and they were largely in Maine and Tennessee where Mrs. Whitaker and Doris Law had previously had their individual businesses with a few scattered in some nine out of the states, where I think the prospect is that they will expand if this — if this arrangement is upheld by the Court.

The 200 scattered members are — could hardly be expected to attend the annual meetings in Maine and as a matter of fact they — most of them never did attend.

There was — well, although the bylaws provided for 51% membership as a quorum, there never was — that I think there were two or three meetings, one annual meeting and two special meetings, there never was a quorum at any one of them — anywhere near a quorum.

And they proceeded to do business anyway without — obviously without meeting the legal requirements.

Bessie Margolin:

There — Mrs. Whitaker admittedly as general manager had authority under the — the bylaws gave her authority subject to the approval of the board of directors to pass on applications for membership which in effect, was deciding whether to hire the homeworkers.

The homeworkers had to — in applying for membership, had to purchase a sample of the goods — of the articles which the — in which the cooperative dealt and to copy the sample and to submit it and Mrs. Whitaker passed upon whether or not they were qualified workers.

Their only proprietary interest, financial interest was to purchase of $3 certificate in the cooperative, which by — under the bylaws did not entitle them to any dividends nor subject them to any liabilities of fraud losses or assessments of the cooperative.

Potter Stewart:

What did it — what – what was the certificate then?

Is there a certificate of membership?–

Bessie Margolin:

The certificate of membership gave them the right to vote in the annual — to vote for the directors in the annual membership meetings.

Potter Stewart:

But didn’t have even a theoretical right to any division of the profits?

Bessie Margolin:

They didn’t have any?

Potter Stewart:

Did they have even a theoretical right to division of profits if any, of the business?

Bessie Margolin:

The bylaws provided that none — no profits should be or no dividends should be issued on the certificates.

But that after all of the expenses and overheads and sales commissions and everything else is paid the board of directors may in their discretion, distribute any excess receipts in proportion to the amount of work each member submitted.

In other words, it was in effect, they — an increase — a possible increase and it’s very theoretical in the rates paid for the work they submitted.

Potter Stewart:

Well, that’s your theory, but it was set up though as a division of profits after a certain cost had been paid.

Bessie Margolin:

In the discretion of the board of directors —

Potter Stewart:


Bessie Margolin:

— after the costs, certainly after this point and there’s been —

Potter Stewart:

And the members vote for the board of the directors, didn’t they?

The members elected the board of the directors?

Bessie Margolin:


Well, the members elected the original board of directors, but they’ve — this was just when 26 of Mrs. Whitaker’s homeworkers were present.

They have never had another election of directors.

They’ve been operating since with this original board of directors to the all —

Potter Stewart:

They had — you said two meetings?

Bessie Margolin:

I think there was two — there were two special meetings and one annual meeting and none of them was anywhere near quorum.

So, there has been no legal election of — if there’d been any changes in the board of directors, it was not — I think there has been a couple, but it has not been done by — I’m sorry, I made a mistake of saying the same board of directors, there had been a couple of changes, but it’s been done at this illegal — with these meetings without any quorum and I think that one —

Hugo L. Black:


Bessie Margolin:

One meeting, there were 37 out at — out of 195 members present.

In another meeting there was — I don’t remember the precise figures, but it was about the same —

Potter Stewart:

At — at one of the meetings at which quorum was not present, the —

Bessie Margolin:

They did.

Potter Stewart:

— they — they amended the bylaws to provide for a lower quorum, didn’t they?

Bessie Margolin:

They — yes.

They — they amended the bylaws to provide I think for 25 persons to make a quorum.

Potter Stewart:

And thereafter?

Bessie Margolin:

It seems to me, that too has some effect on whether or not the — this was a bona fide number to control the cooperative.

It may have started out originally with the intent to give the members way of control.

It was apparent that some real voice and the management, I don’t think they intended to give them —

Potter Stewart:

Were the members all in — all in a close physical neighborhood or (Voice Overlap) Maine?

Bessie Margolin:

The original incorporators were all in and around in towns I think, within a radius certainly of 100 miles.

I believe that of Troy, Maine, Mrs. Whitaker’s homeworkers.

The Tennessee homeworkers are some of the same group that Mrs. Hall employed and Mrs. Law employed.

That there are also a few homeworker members, a few scattered in about eight of the states throughout the country.

Potter Stewart:

Where were these meetings held?

Bessie Margolin:

The meetings were held in either Waterville or Troy, Maine.

Hugo L. Black:

Who would elect the directors you said in —

Bessie Margolin:

The 26 original incorporators elected the original directors.

And there hasn’t been any — any membership meeting with the — with a quorum to elect any other directors.

Hugo L. Black:

Well I thought you said, some had been elected (Inaudible) by —

Bessie Margolin:

Well, by the meetings without a quorum, to fill vacancies for resignations.

Hugo L. Black:

Meetings — meetings with just the elected directors?

Meetings would rule on the director?

Bessie Margolin:

Well, I think it was other business, other business transacted to for example.

They made it — at one of these meetings and there was — well, there was a vote to change the — the method of payment of — of the homeworkers.

And a proposal was made that 40% of the amounts due then be withheld to set up a fund for — a capital reserve fund and until the articles were sold.

And that the — the members table that and — and a motion was passed to — to pay them at fixed periods every two months.

And prior to that time, the — there had been a provision that these board of directors voted to pay for articles submitted before the 10th of the month, by the 20th of the month and for articles submitted after the 10th by the 20th of the following month.

Interestingly enough that very provision was I say interestingly enough I think understandably, it was taken from Mrs. Law’s method of operation, her contracts with her homeworkers in Tennessee and that appear in the opinion of Judge Boyd in the Law case, in the case against Mrs. Law. Mrs. Whitaker admittedly, nobody else here knew anything about fixing — fixing the rates to be paid for this work and in our reply brief we showed that there were fixed rates for despite the denial of counsel and that these were in fact fixed by Mrs. Whitaker with the subject to the approval of the board of directors but is impractical matter, she fixed them, if I might reserve few minutes for rebuttal.

Earl Warren:

You may — you may Ms. Margolin.

Mr. Bird.

Philip S. Bird:

Mr. Chief Justice, may it please the Court.

Philip S. Bird:

Well four years ago at this time, I started receiving several letters from many of the prospective members of what is now known as Whitaker House Cooperative and each one of them invariably asked why doesn’t the Government let us alone and let us take care of ourselves?

Isn’t there something that could be done, because they had heard that Mrs. Whitaker had been requested to — go out of business by the Department of Labor.

Well, I had contacted the Labor Department for Mrs. Whitaker.

I received the letter from them and after reading it and looking at some of the references cited by the attorney for the regional office, I advised her that she had best fold her doors and find some other way of making a livelihood.

At short time after she went out of business and it was about this time of the year, where these letters started coming in and I wondered about them a little bit, but I didn’t feel there’s anything that I could do about it.

Then one day, a regional investigator from the Department of Labor, who had been investigated for a long time, ever since the (Inaudible) into effect, called at my office and he was — had to be in town and we’ve talked the thing over a little bit.

And he said, have you ever start — thought of starting a cooperative?

Now I said, well, I had orders in reading the Palmer case to at least by innuendo of the court in the First Circuit, there was a possibility that a true cooperative might comply with the law.

And I didn’t know a thing about cooperative, so I sent for a book which was cited in the Palmer case as being authoritative on the subject of cooperatives.

After getting the book which is Law of Cooperatives, Third Edition by Israel Packel, I read through it and decided that perhaps this was a possibility.

I’m not evading the law, but avoiding the law and I so informed many of the women who had written to me.

Some of the women came to my office, one of the discussions had, after these discussions why a letter was sent out which was cited in the file record dated I believe June 28, following a meeting of those who were interested in forming some way of — a business of — some sort of business that might allow them to continue in this skill craft f theirs.

Earl Warren:

What is the law were you seeking to avoid, Mr. Bird?

Philip S. Bird:

I beg your pardon?

Earl Warren:

What part of the law were you seeking to avoid?

Philip S. Bird:

The minimum — we were seeking to comply with the law in respect that admittedly, we knew that these women and the women knew it themselves, could not pay themselves $1 an hour minimum and they could not comply with the minimum wage an hour requirements for Fair Labor Standards Act.

Earl Warren:

So, it was a minimum wage an hour —

Philip S. Bird:

Law that admitted —

Earl Warren:

— requirements that you were seeking to avoid?

Philip S. Bird:


In addition to this, we had hoped and as it is outlined in the letter, we hoped that the institution of the cooperative would provide some other benefits to them.

The cooperative — the women who initiated the cooperative met as described by the counsel for the appellant.

The articles of incorporation were presented to them in the usual form provided by this statutory procedure.

The bylaws were presented, prepared not by me, but Mr. Packel.

And if you will — have opportunity to compare the bylaws that are in this book with the actual bylaws that were printed and sent out all the members eventually, you would say that they are almost identical and this is borne out by the decision of the District Court who said also that they were copied from the forms set forth in Mr. Packel’s book.

Earl Warren:

And who — who were you employed by when you were doing this for some —

Philip S. Bird:

I wasn’t employed by the women.

They — they sent a small amounts of money in — to me from all over the State.

Mrs. Whitaker never paid me a cent for this work.

The cooperative then proceeded to organize and they determined that the best name that they could think of to use was the name Whitaker House.

Philip S. Bird:

I advised them against this because I anticipated that there might be some relationship made that for later time by the Department of Labor with Mrs. Whitaker and — and it was that’s what has happened.

They straight through from the very beginning, the Department of Labor has tried — tried to equate this organization with the ones described in the Palmer case and in – (Inaudible) case.

After the interrogatories were filed by the Government and responses given thereto, a two-day hearing was held before the lower court.

By the way, the lower court had just about three months prior to this time had another case which is set forth in Mitchell versus (Inaudible) which is cited in both in the appellant’s brief in which he had gone into the law involved in this type of litigation very extensively.

And when he first confronted — was confronted with this case, he said, isn’t this just another case all over again?

I said, I beg to differ with you, Your Honor.

I think you’ll find it’s considerably different and he did so find that it was considerably different.

He found that this was a true cooperative and I don’t want to go into the arguments today on the evidence.

I think that the courts below had found the facts fairly.

What I do want to address my remarks to the Court of is that this very important question as to whether or not, a member, owner, producers of a true cooperative are employees subject to the Fair Labor Standards Act.

And as I was interesting — it was interesting to me yesterday in listening to the argument in the ASCAP case to wonder if there isn’t some analogy in that case with ours.

There, you have association of 6400 people and incorporated to be sure, but the fact of incorporation should not I feel, has any bearing on the decision in this case.

Whether it’s a group, an association or a corporation, I feel should not have any relevance whatsoever in the final outcome of this hearing.

What would happen in the ASCAP case, for example if the Department of Labor should institute an action against ASCAP or a certain segment of their membership, because they control all the other composers and publishers or control all of the composers?

I think we can pretty well agree that there would have a difficult time sustaining an employment relationship there.

I think in considering for this case, we have to start with some pretty fundamental basic premises.

One is — I always thought it was to any rank that an individual has a right to make things or to act in a productive way whether it’s creatively making something in the way of art or making something intangible in the way of music or something tangible as in this case.

He has a right to make them.

He has the right to dispose of them in the ordinary channels of commerce in the best way that he possibly can.

Secondly, I think we must agree that two or more of these — of these individuals have a right to get together and pull their efforts in this direction and save — thus saving themselves on cost, in order to sell their products of their work for the best advantage and in interstate commerce, without their having to pay themselves $1 an hour for their labor and of course, both courts below seemed to be of the similar opinion.

Where then does the Department of Labor propose to draw a line which will say X number of people can do this, but X plus one can’t do this?

We here, are considering an employment relationship.

There is nothing in the Act as propounded by the Congress and as illustrated by the decision below.

There is no language in the Act which proposes to include all types of activities.

It proposes to include all types of employment, but that doesn’t mean that every person engaged in productive work is going to be subject to the Act.

Many illustrations can be brought to the attention of the — a court that a number of people that do choose to work.

It’s amazing to some people I realized what they do choose to work for less than $1 an hour.

If they obtained some satisfaction from it, that’s for them to decide.

The decision of the court below is submitted contrary to the argument of the appellant, do nothing to alter, effect or change any of the previous rulings of this Court.

They do nothing to alter or change any of the prior rulings of the Circuit Courts who have been called upon to apply this section.

Philip S. Bird:

This is the first case in which a true cooperative has come to the attention of any court as far as — as my knowledge is concerned under this particular Act.

When we look at the decisions below, I think it is important to bear in mind that the Circuit Court here involved, is the very one who handed down the decision upon which the appellant relies in their appeal, namely the Palmer case.

And of course, consistent and right straight along, the appellant has endeavored to equate all the facts of this case with the Palmer case and it just doesn’t fit.

I made a diagram in my brief.

There is a whole list of different — differences beginning from the very institution of the cooperative.

In the Palmer case, you have an obvious creation of cooperative from the top down with everything done to guarantee that the Palmer management would retain and maintain the control and operation of a cooperative.

That just isn’t so here.

The bylaws have specifically provided that the membership shall have — each individual in the cooperative shall an equal vote with every other individual and that no one is in the position to obtain superior control over the entire operation.

I don’t think that the appellant can persuade the Court now, after two prior determinations on the facts that we are not dealing here with a bona fide cooperative.

We have a bona fide cooperative and it seems to me the important consideration here is whether or not, the member producers, owners of such an organization, come within the Act.

Now, another case which the appellant relies on pretty heavily in their brief is the Farmers Irrigation case and which employees — admitted employees of a — an agricultural ditch cooperative so to speak, were held to come within the Act.

Not — the issue there was not whether or not they’re employees, but whether or not these employees were agricultural employees or employees engaged in collection in the normal channels of interstate commerce.

The important thing to remember here is that they were not dealing with the farmers themselves who were the owners of the cooperative.

Let’s try and picture the situation a little differently in the Farmers Irrigation case if we may.

Let’s say the farmers did all the work themselves on a cooperative basis, on these ditches and that they did not hire any employees to do the work.

They did it all themselves and then shared in the — the proceeds of the service that they were earning to themselves.

Would we not then have a different result granting for the moment that they would be included as – exempt as agricultural employees, if we disregard that and just take on the basis of a comparable relationship.

They certainly would not be — construed to be employees of their own organization.

It seems to me that this is now a — another illustration of an attempt by the governmental agency to stretch the application of the Act beyond any reasonable interpretation of its original intent.

The court below and the District Court specifically requested that all of the hearing that were published in this matter be sent to it — submitted to it for the consideration prior to the decision, this was done.

And I’m sure that many of you have personal knowledge of these hearings yourself.

I for one have been unable in all of the records, to find a single instance where it has said that a member, farmer, producer of a cooperative shall be within the Act.

The only time that this is mentioned is when they’re talking about the employees of cooperatives.

They always talk in terms of an assumed employment relationship.

They never talk in terms of the member owners of the cooperative being subject to the Act.

In the various bills that have been introduced in Congress to exempt, say dairying cooperative employees because they try to liken them to being agricultural employees, they are always talking about admitted employees.

They’re talking about exempting admitted employees.

They’re not talking about exempting the owner of the dairy or the group of people who own the dairy.

In conclusion, I would like to say that a cooperative organization is a one way, remaining open to individuals in our country for providing a form of industrial democracy.

It has been a pleasure to work with these women in this case, in this case of — it’s been a pleasure to watch them learn some of the things that go into conducting a business.

Philip S. Bird:

It hasn’t been easy for them.

It hasn’t been easy for anyone, but they are learning — they are willing to assume the risk.

As a matter of fact, they’ve made several changes since the day of the trial.

This is not before you and not proper that it should be of course, but they are anxious to continue their — their business and they are anxious to improve upon it.

They are willing if necessary, to accept losses in order to be in a position to take advantage of better marketing facilities in the urban areas of the country.

This organization was setup to help them, help themselves.

It was not setup to enable them to serve the cooperative.

Judge — Judge Aldrich in his dissenting opinion, I think misstates the question.

With all due respect to the judge, I think he might more properly have stated the question (Inaudible) in regard to union membership.

If a union should become an owner of the plant where the members are working, such as in the (Inaudible) Manufacturing case, which is cited in the brief, as an example of a partnership which was held not to be within the Act.

If a union should become an owner of the business and if each union member had an equal vote in the operation of the business and if each union member should share in the profits of the business according to the time that he put into it, what difference is there between that and a partnership or a cooperative that we have here and where is the employment relationship?

How can a man employ himself or how can a group of individuals in this situation employ themselves?

I’m directing my concluding remarks to Judge Aldrich’s second question.

I believe he states that, “A stockholder who is also an employee obviously, is not exempt just because he becomes the stockholder admittedly,” but there are two different relationships here.

The stockholder’s interest is obtaining a return on his capital investment and employee’s objective is getting his return on his labor.

If you merge those into one, so that the interest of the labor is identical with his interest as a stockholder as in a cooperative, then he ceases to be an employee and becomes an employer.

He becomes a self-employed person.

I think it is too late in the game now for the appellant to seriously contend that the cooperative is not a bona fide organization.

It’s also quite obvious that their contentions as far as the — the law is concerned, do not hold too much weight.

They cannot claim a single reference which specifically says that these people are not to be included and are to be included within the law.

They cannot produce a single citation which says that they are to be included and if the language of the Act does not include them, then certainly they should not be allowed by administrative legislation to so include them.

Thank you very much.

Earl Warren:

Ms. Margolin.

Bessie Margolin:

I just have one point to add in answer to counsel’s question as to how can a group employ any of themselves as a — apparently this was the approach of the court below and I think the very fact of this case and I will answer to that.

The cooperative does employ trimmers as — who are also members and who also have the same degree of ownership as the homeworker.

Now what the — and they pay them $1 an hour.

The only difference is that these trimmers work in — on the premises — Mrs. — on the premises of the cooperative at Mrs. Whitaker’s residence, whereas the homeworkers work their homes.

In fact, Mrs. Whitaker herself is a member and yet she’s employed as general manager at a salary.

Hugo L. Black:

Has an attack made on the bona fide issues of the cooperative?

Bessie Margolin:


Bessie Margolin:

We have a twofold — we have a twofold argument here, one that whether or not, it’s bona fide.

The cooperative and its managing officials are in an employment relationship with the homeworkers.

The second — our second point is that it was clearly erroneous, the finding that the — it was a bona fide member control cooperative is clearly erroneous, yes.

Hugo L. Black:

May I ask you just one more question before I am — how do they get paid?

Bessie Margolin:

They are paid at rates – there is a schedule of rates in the — in the record at rates that are fixed by Mrs. Whitaker, who is the general manager, theoretically subject to the approval of the board of directors and they had first —

Hugo L. Black:

Hourly or daily rates or what?

Bessie Margolin:

They’re piece rates.

They’re piece rates and —

Hugo L. Black:

Piece rates – all together?

Bessie Margolin:

For — up for per dozen.

It’s usually at — runs around for the booties, I think around no more than $8 a — a dozen for booties, it’s usually less than that and they get paid just by the piece —

Hugo L. Black:

Was there any pooling of funds, (Inaudible) of funds?

Bessie Margolin:

They are paid — their paying hasn’t been as regular and recently as it was.

At first, they were paid apparently fairly regularly as they sent them in.

Then recently the board of directors passed a resolution that this was a method of controlling the submission of articles they didn’t want.

That they would pay — they called them advances, they would pay for only for articles that — for which they had orders on hand and unless and until they were — they’re sold and this was a way of controlling the inventory and having — having sent in only articles for which they had orders.

The individual can do as little or as much work as she pleases?

Bessie Margolin:

Yes, this was so — this is so in all of these homeworker situations.

That’s nothing — nothing different in that respect.

In fact here, they have less freedom because the bylaws require them to sell — forbid them — prohibit them from selling to anyone other than the cooperative prior to the — the prior arrangements they had, they could sell to others and they sometimes did.

But here, they’re prohibited from selling to any other business, any articles which the — in which the cooperative deals.

Earl Warren:

We’ll adjourn now.